Salary versus Dividends

Contents

Chapter 1 Introduction

• 1.1 Why is the Salary/Dividend Question So Important?
• 1.2 Which Companies are Affected?
• 1.3 Marginal Rates and the Inevitable Trade-Off
• 1.4 What's the Difference?
• 1.5 Salary or Bonus?
• 1.6 Scope of this Guide
• 1.7 A Note About 'Revenue and Customs'

Chapter 2 Overview of How Companies and Directors are Taxed

• 2.1 Corporation Tax Relief
• 2.2 Small Companies
• 2.3 Corporation Tax on Dividends
• 2.4 Marginal Tax Rates for Directors
• 2.5 Employer's National Insurance Contributions
• 2.6 Cashflow
• 2.7 Other Factors Affecting Tax on a Salary or Dividend

Chapter 3 The Taxcafe Computer Model

• 3.1 Introduction to the Model
• 3.2 Model Results 2006/2007
• 3.3 Small Companies: Accounting Periods Beginning Before 1st April 2006
• 3.4 Summary of Computer Model Results

Chapter 4 Planning Dividend or Bonus Payments

• 4.1 Step by Step
• 4.2 Planning for Profit
• 4.3 Timing
• 4.4 Using the Model for More Complex Decisions
• 4.5 Increasing Director's Income
• 4.6 Reducing Taxable Profit
• 4.7 Using the Tables
• 4.8 Simple Case Study
• 4.9 Case Study II
• 4.10 Spreading the Cost
• 4.11 What Can We Conclude for Certain?
• 4.12 Bottom-Up Planning
• 4.13 Small Companies: Profits Not Exceeding £305,035
• 4.14 Medium-Sized Companies: Profits Between £305,035 And £1,507,460
• 4.15 Large Companies: Profits Exceeding £1,507,460
• 4.16 Summary of 'Bottom-Up' Planning
• 4.17 The Bigger Picture

Chapter 5 Using Loan Accounts

• 5.1 Exploiting Tax Advantages
• 5.2 Lend to Save
• 5.3 Medium-Term Benefits
• 5.4 Long-Term Benefits
• 5.5 Very Long Term
• 5.6 Interest on Loan Accounts

Chapter 6 Multiple Owners

• 6.1 Background
• 6.2 Corporate Couples
• 6.3 Unequal Couples
• 6.4 Bottom-Up Planning for Couples
• 6.5 Other Co-Owners
• 6.6 Family Companies
• 6.7 Minority Shareholders
• 6.8 Company Budgets
• 6.9 The Composite Rate Approach
• 6.10 Every Loser Wins

Chapter 7 Companies With Different Tax Rates

• 7.1 Associated Companies
• 7.2 What is an Associated Company?
• 7.3 Short Accounting Periods
• 7.4 Long Accounting Periods
• 7.5 The Corporation Tax Threshold Formula
• 7.6 Loss-Making Companies
• 7.7 Close Investment Holding Companies

Chapter 8 Older Directors

• 8.1 Privileges of Age
• 8.2 Age-Related Allowances
• 8.3 Withdrawal of Allowances
• 8.4 National Insurance for Older Directors
• 8.5 Marginal Tax Rates on Salaries and Bonuses for Older Directors
• 8.6 Directors Aged 65 or Over
• 8.7 Female Directors Aged 60 to 64
• 8.8 When I'm 64
• 8.9 Younger Directors with Older Spouses
• 8.10 Marginal Rates on Dividends for Older Directors
• 8.11 The Taxcafe Computer Model for Older Directors
• 8.12 Older Directors of Small Companies
• 8.13 Planning Payments to Older Directors

Chapter 9 Directors with Children

• 9.1 The Impact of Tax Credits
• 9.2 Working Tax Credits
• 9.3 Child Tax Credits
• 9.4 Childcare Costs
• 9.5 Family Element
• 9.6 The Income Disregard
• 9.7 Tax Credits and Salary or Bonus
• 9.8 Tax Credits and Dividends
• 9.9 The Taxcafe Computer Model for Directors with Children
• 9.10 Model Conclusions for Directors with Children

Chapter 10 Paying Dividends, Salary or Bonuses in Practice

• 10.1 Welcome to the Real World
• 10.2 Commercial Considerations
• 10.3 Impact of Dividends on Share Value
• 10.4 Justifying Salaries or Bonuses
• 10.5 Paying a Dividend
• 10.6 Frequency and Amount of Payments
• 10.7 The National Minimum Wage
• 10.8 State Pension Entitlement
• 10.9 Unclassified Withdrawals

Chapter 11 Pension Contributions

• 11.1 The New Pensions Regime
• 11.2 Company Contributions
• 11.3 Personal Pension Contributions

Chapter 12 Non-Cash Payments

• 12.1 Payment in Kind
• 12.2 Bonus in Specie
• 12.3 The Car Bonus

Chapter 13 The Third Way – Capital Growth

• 13.1 Maximising Capital Growth
• 13.2 Best of Both Worlds
• 13.3 Safeguarding Taper Relief
• 13.4 Guiding Principles

Chapter 14 Special Cases

• 14.1 Personal Service Companies
• 14.2 'Husband and Wife' Companies

• Appendix A Tax Rates and Allowances
• Appendix B Sample Documentation
• Appendix C Dividends Paid by Small Companies Before 1st April 2006
• Appendix D The Taxcafe Computer Model 2006/07
• Appendix E Directory of Computer Model Results