As the owner and director of your own company, you decide how much salary to take each year.
Paying yourself a small salary can be a good way to maintain your national insurance record to build up state benefit entitlements.
In the tax year 2021-22 if you take a salary of between £6,420 and £9,568 (£797 per month) you will pay no NIC but you will get a NIC credit towards your state pension.
Where your company employs at least one other person in the year it may qualify for the employment allowance of £4,000 which covers the cost of employer’s Class 1 NIC up to that cap. We can help you check if your company can claim the employment allowance for 2021-22.
The ideal salary of a director will depend on a number of factors. We can help confirm what the optimal salary is for you in 2021-22. Directors who are also shareholders of their company often extract further cash as dividends using the £2,000 dividend allowance and the lower dividend tax rates of 7.5% and 32.5% to minimise their tax bills.
Everyone’s financial circumstances are different so please discuss your position with us before deciding on the level of salary and dividends to take for the year.
