How to Pay Yourself – Salary Dividends & Benefits


♪ The best things in life are free ♪ ♪ But you can give them
to the birds and bees ♪ ♪ I need money ♪ ♪ That’s what I want ♪ ♪ That’s what I want ♪ ♪ That’s what I want ♪ (laughing) – Hi, everybody. Did you like that little
bit of lip synching there? Okay, so, today we’re
gonna be talking about how to pay yourself out
of your business, okay? So, here’s Scampi again, as you can see we’ve paid him, he’s got his salary there, and his dividends. Okay, so over to Mahmood, who’s going to go through some really important points, guys. – Thank you very much Serena. Thank you very much Scampi. Now, a common question that we always get
asked by business owners is how we pay ourself. Now, the most rehearsed route we know is you pay yourself a salary, when it comes up on the board. Typically, just rehearsed that, typically it just set
a relatively low level, so you can get some credit
for your state pension when you eventually retire. The rest is taken out as dividends. You got the difference here. You got a dividend free allowance here. We’re not gonna rehearse and go over the same old details. We’re gonna table to
illustrate the impact. The third thing that
is not often considered is actually the company
providing benefits to you. So let’s have a look first of all in terms of the salary. Summary of the general situation here. You’ve got three things to consider, your status as a taxpayer. So if your income is below 50 grand, salary, overall tax rate for company and yourself personally is 40%. You as an individual in terms you take it out as dividends. The overall tax rate is 25. Really good advantage for
dividends in that situation. If you happen to be what’s
called a high rate taxpayer, 50 grand plus, then paying yourself salary is an overall tax rate for
you and the company at 49. Pay yourself dividends is about 45%, so the gap really narrows, but dividends are still,
you know, more preferred. If you have to be in the blimey rate. That’s if you’re 150 grand a year plus, you know, great target to get to, then the salary route is 53% overall tax burden for
you and the company. Dividend rate is 50% overall. So the gap’s really narrowed, but still the edge is given to dividends. Now, route number three is benefits. So there are some benefits
the company can pay for which is all tax free, Tax Deductible. So things like providing a Mobile Phone, Health Screening, Eye tests and the like. In other situations though, it’s still worthwhile to consider the company actually paying for things you would pay for personally. And when you’re gonna look at it is, what do you need to take home to actually pay for those benefits. So what I’ve done here. I’ve summarised three scenarios. If you’re a basic rate payer, look at those wonderful savings. The company provides the benefit, you still pay tax, but you’re still better off. And it’s all about
money, in this situation. You’re a high rate payer, the savings become that much bigger. Again, that’s taking all those wonderful factors into account. And lastly, if you’re in the blimey rate, then the savings become much more bigger. So always worth considering. So hope you found this useful. – Okay, guys. So come on, get on Facebook, like us on LinkedIn. We know you look at it guys. Keep liking us, and head over to the website as well, have look at the blog in more detail ’cause there’s lots
interesting stuff on there as most of you will know if you’ve been on there. – So this is all from us
from the numbers guys. Hoping to turn your tax frowns – Into smiles. – [Both] Ciao! (upbeat music)

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