There are a few different ways to be paid as a company director for example by putting yourself on payroll or paying yourself through dividends.
Dividends are paid to shareholders in a business when the company makes a profit. The Dividend Allowance for 2021/2022 is £2,000 meaning you only pay tax when you earnings exceed this amount; basic rate tax band pays 7.5% while the higher rate pays 32.5% and additional rate is 38.1%. This is on top of the 19% Corporation Tax you pay on company profits.
Alternatively, you can put yourself on your company payroll and pay yourself a ‘living wage’ every month which provides a regular stream of income. However, this comes with PAYE Income Tax and National Insurance Contributions although if your monthly pay is less than £737, you do not have to pay NICs.
Knowing how to take control of your business finances to maximise profits can be difficult, especially with the current climate. Knowing the common mistakes to avoid can be difficult and can leave you feeling unsure.
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