Tax Code changes
The personal allowance has increased. For 2019/20, it will rise by £650 to £12,500 from 6th April 2019. Unless you receive an amended tax code notification, all “L” suffix codes will need to increase by 65 for 2019/20, e.g. code 1185L becomes 1250L.
Optimum director shareholder salaries and dividends
If the directors in your company are also shareholders and receive remuneration in the form of a minimum salary and dividends, then what’s their optimum salary/dividend package in 2019/20?
(1) they don’t have an employment contract so the national minimum wage doesn’t apply;
(2) your annual employers’ NI bill is already more than £3,000, so you will have fully utilised the employment allowance; and
(3) they have not yet accrued maximum entitlement to the state pension, then the sweet-spot is to go up to the NI threshold but no higher.
So for 2019/20, this would be a monthly gross salary of £719 which takes them up to the NI threshold. With regards to dividends, if the director shareholders want to go up to the basic rate limit (£37,500 for 2019/20) but no further, assuming they have no other income, they can receive dividends of £41,372 for the tax year (£3,447 a month) on which they’ll have to pay personal tax of £2,662.50 by 31st January 2021.
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