Optimum Directors’ Salary and Dividends for 2022/23 💷

What's the optimum directors’ salary and dividend mix for 2022/23?

Small companies usually pay their directors with a mix of salary and dividends. The directors' salary level is typically set to avoid income tax and national insurance. On this basis, the recommended remuneration package for the forthcoming tax year is:

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 will be taxed via the directors’ Self-Assessment Income Tax Return at 8.75% (up from 7.5%). Meaning that if dividends are paid all the way up to the basic rate band of £50,270 (last year was the same at £50,270), there will be a personal tax bill of £3,124 (last year £2,678).

Companies with more than one director on the payroll may benefit from the Employment Allowance, which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £5,000.

In such cases, there may be an opportunity to eke out a little more tax savings by paying a director's salary of £12,570 and dividends up to a maximum of £37,700 (the overall tax saving being around £514).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

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