This calculator is designed for contractors and company directors who earn £25,000.00 per year to assess the optimal breakdown of tax calculations to understand the best approach to their payroll solution. The calculator will balance Personal Allowance, Dividend Allowance and other tax metrics to provide a breakdown of tax and payroll deductions and your associated take home income from your gross sales of £25,000.00.
Move the slider from left [More income as PAYE Salary] to right [More income as a Dividend] to find the best mathematical split of your income to minimise your tax and payroll commitments within HMRC legislation
With the introduction of new dividend calculations introduced by HMRC in 2016 via Thresholds and rates (similar to PAYE), dividends have become less attractive but still provide a more tax efficient solution than exclusive PAYE income which attracts National Insurance Contributions (NICs), Employers NICs mandatory company pension payments (if you are opted in to your company pension scheme).
PAYE is deducted before Corporation Tax (payroll is an operational expense) so there are slightly different calculations that you need to consider to make an informed decision as to which is the best tax solution for your total income (or sales generated - important semantics!). The Combined PAYE and Dividend Calculator does just that using the key elements to allow an informed decision. Note that this tool is a simplified version of the 2019 Holistic PAYE and Tax Calculator which allows you to refine your tax details and produce diverse reports / outputs.
Note that this calculator assumes you are an individual looking to calculate the most efficient tax solution. If you run a small company and are married etc. you may elect to make your partner a business partner, as a company director they can also be paid a salary and/or dividends depending on the nature of the company setup. Note that they must be actively involved in the day-to-day running of the company to legally warrant their income and you should be able to demonstrate this to HMRC if they query your accounts. If you are thinking of walking this route it is essential you get yourself a good accountant, have solid processes and company structure to underpin your accounting principals. There are plenty of good accountants around, if you prefer you can contact us and we can put you in touch with one of the accountants who contribute to the iCalculator project.
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