Ideal salary for 2021-22
As the owner and director of your own company you decide how much salary to take each year. Paying yourself a small salary can be a good way to maintain your national insurance record to build up state benefit entitlements.
As the owner and director of your own company you decide how much salary to take each year. Paying yourself a small salary can be a good way to maintain your national insurance record to build up state benefit entitlements.
In the tax year 2021-22 if you take a salary of between £6,420 and £9,568 (£797 per month) you will pay no NIC but you will get an NIC credit towards your state pension.
Where your company employs at least one other person in the year it may qualify for the employment allowance of £4,000 which covers the cost of employer's Class 1 NIC up to that cap. We can help you check if your company can claim the employment allowance for 2021-22.
The ideal salary of a director will depend on a number of factors. We can help confirm what the optimal salary is for you in 2021-22. Directors who are also shareholders of their company often extract further cash as dividends using the £2,000 dividend allowance and the lower dividend tax rates of 7.5% and 32.5% to minimise their tax bills.
Everyone's financial circumstances are different so please discuss your position with us before deciding on the level of salary and dividends to take for the year.
Last updated: May 4th 2021.
