As we head into a new tax year, we’ve been doing our homework in the background as usual to come up with the best strategy for directors’ salaries.

We work on the basis of making the most of your tax allowance and taking account of things like changes in the dividend allowance and impact on National Insurance to arrive at our recommendation.

Our salary strategy for 2024/25

Claire has considered lots of options and settled on an annual salary of £12,570 a year, or £1,047.50 a month for most directors.

If you have any other income (say from rental properties) your salary will be £9,096 a year or £758 a month.

Paying this salary in place of dividends saves anything from £2,388 to £3,331 in Corporation Tax (depending on the rate you pay), because salary is allowed as an expense against profit and dividends aren’t.

For most of our clients this is a notional exercise with the salary recorded in your accounts and our team working the magic on your drawings in the background to allocate the right amounts to salary and dividends at the right times, depending on how much you take out of the company each year.

The impact on National Insurance

At these salary levels all directors will meet the minimum threshold for NI, which means you still get a qualifying year for benefits like the state pension but won’t actually need to make a payment. You won’t need to pay any personal tax on your salary either (although you will have some personal tax to pay on dividends if you take them).

If you only have one employee, your company will have an NI payment to pay – employer’s National Insurance Contribution. This will be £478.86 for a company with one director, with the amount rising depending on how many people you employ. If you have two or more directors or employees on payroll you’ll get the Employment Allowance, which means you won’t have to pay some of the NI.

If you have a company NI liability, the company will pay this by direct debit, so they aren’t overlooked. According to HMRC’s schedule, payments will be due in January, February, March and April 2025

• Due 19th Jan £45.19
• Due 19th Feb £144.56
• Due 19th March £144.56
• Due 19th April £144.56

Total £478.86