General

Question 1

Benefits of paying minimal salary and dividends for company director

Answer 1

No income tax on salary
Salary is a deductible cost for corp tax purposes
Dividends not classed as earnings for NI
Salary is above lower earnings limit so qualifies for state benefits
Doesn’t need to pay employee NI
Company doesn’t need to pay employer NI
Dividend allowance available of £1,000
Dividends taxed at lower rate than income tax state different figures

Question 2

Tax considerations and limitations of making a personal pension contribution

Answer 2

100% of relevant earnings to get tax relief
BRT relief given at source
BRT band extended by amount of gross pension contribution
Save tax on income that fall within extended band (state %)
Personal allowance could be reinstated if it had been lost and contributions sufficient