We have now entered the 2024/25 tax year, beginning 6 April 2024. The low tax strategy of paying yourself a low salary from your limited company topped up with dividends remains as important as ever when seeking to minimise the tax take on your income. This strategy continues to present the low tax option for a limited company director seeking to minimise the overall tax take. So the strategy to pay yourself remains the same but this blog article will explain how much you can pay yourself without incurring any income tax and national insurance charges.

Things remain stable once again this year with the monthly sum that we recommend you pay yourself remaining £758 a month which results in an annual director’s salary of £9,096. You should then pay yourself dividends on top of this level of salary to take advantage of this low tax option.

At this level of salary you won’t have to pay employer or employee national insurance contributions and no income tax will be due to be paid to HMRC on the wage you receive. The dividends you receive will be subject to dividend tax but a tax-free dividend allowance of £500 will apply during 2024-25 (down from £1,000 during 2023-24).

The total director salary of £9,096 is less than the personal allowance (£12,570) for the 2024-25 tax year but don’t be tempted to pay yourself up to the personal allowance as you will then end up paying more in tax.

If you pay up to the personal allowance you will be liable to pay national insurance contributions which can be avoided at the £9,096 salary level.

The low tax option we recommend is to simply pay yourself dividends instead to use up the remainder of your personal allowance and then use the dividend tax free allowance. This means that you can receive a total of £13,070 tax free (personal allowance plus the dividend allowance).

If you need any further guidance in relation to extracting income from your limited company then feel free to contact one of our cheap accountants.