Limited company personal taxes
James Trowell
Accounting Lead
Posted 3 months ago

Limited company tax rates 19/20, part 2 – personal taxes

We’ve covered company taxes (here), so now we’re going to look at the personal taxes that may apply to you as the director of a limited company.

Split across three key areas: income tax, national insurance and dividends.

Income tax (For Directors And Employees)

You may decide to take a salary out of the company, or perhaps you have employees on the payroll. In both cases you will need to consider income tax and make sure you are registered for payroll.

If you don’t already have an accountant, we’d recommend that you chat to one about how to structure your tax to make sure you pay the correct amount, and to get help setting up and running payroll each month.

Personal Allowance

Every individual has a personal allowance on income that resets each tax year. This is the amount of income you can earn tax free, and it changes based on the amount of income you earn as shown below.

This tax year this has increased from £11,850 to £12,500.

Income Bracket

Personal Allowance

£0 – £100,000

£12,500

£100,001 – £125,000

Your personal allowance will decrease by £1 for every £2 of income over £100,000

£125,001 or over

£0

Income Tax Rates 19/20

If you’re a limited company and running a payroll scheme through your company, your employees will be subject to income tax rates based on the salary level run weekly or monthly.

For the 19/20 tax year, if you are based in England, Wales or Northern Ireland, all income that you or any other employees earn over and above your personal allowance will be taxed as follows:

Tax Bracket

Rate

Earnings below personal allowance (£12,500)

No income tax payable

Basic rate (Between £12,500- £50,000)

20%

Higher rate (Between £50,001- £150,000)

40%

Additional rate (Over £150,000)

45%

If you live in Scotland, different income tax rates apply, as shown below:

Tax Bands

Rate

Earnings below personal allowance (£12,500)

No income tax payable

Starter rate (Between £12,500- £14,549)

19%

Basic rate (Between £14,549 to £24,944)

20%

Intermediate rate (Between £24,944 to £43,430)

21%

Higher rate (Between £43,430 to £150,000)

41%

Additional rate (Over £150,000)

46%

National Insurance Rates 19/20

In addition to income tax, if you pay yourself (or any employees) a salary through your limited company, you may be subject to pay employee’s national insurance. The rates for this year are set out below.

Employee NI rates

Annual Salary

Class 1 Payable

Below £8,632

No National Insurance is payable

Between £8,632 – £50,000

12%

Over £50,000

2%

Dividend Tax Rates 19/20

Last but not least, you may also choose to remunerate yourself in the form of dividends. A dividend is a share of the company’s profits, paid to its shareholders. ‘Shareholder’ is the legal term for a person who owns all or part of a company, which in this case is you.

The first £2,000 is tax free, from that point forward the rates below will apply:

Tax Bracket

Dividend Rate

Basic rate

7.5%

Higher Rate

32.5%

Additional Rate

38.1%

And there it is.

Need some guidance?

We’d always recommend talking to an accountant to make sure you’re paying the correct amount of tax. They will be able to advise on your specific situation and with a view on what’s best for your business.

If you already have one, you can share access to your Coconut account with them through the Coconut Accountant Portal. But if don’t yet have one, you can speak with one through our Integrated Accounting Partners. Book a call with our team today at a time that suits you.

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