I love that there's no fluff - you just explain it all concisely in 12 minutes. Perfect.

You forgot to mention a company pension. This is also a expense and can be used to lower your corporate tax. 👍

What I've seen a lot of people do in my line of work was create different ltd companies for different functions ie manufacturing, warehousing, installation, retail. All of a sudden you have 4 sources of income from what is effectively one business. I also have access to wage-rolls though and sometimes the disparity is quite enlightening. I remember seeing a swimming company which turned over £3m a year, 16 staff with a total wage-roll of £160,000 so average £16k each, the sole director's salary and dividends on the other hand were enormous comparatively. But hey that's capitalism I suppose, it's just interesting looking at all the different companies and seeing who's generous/"values their people" and who makes Scrooge look like a philanthtopist. The ones who are the actual shitbags though imo are the ones who's insolvency cases I come across, then you look at the statement of affairs and see £100,000s in unpaid employee wages. This is quite frequent in contracting companies. Imagine being one of those guys, employees are not secured creditors so they are quite far down in the pecking order when assets are being liquidated and creditors paid. I'm not an expert on this stuff by any means but personally I think it should be written into law that employees are secured creditors and preferably should be the first to be paid out of company assets as they need it far more than the bank etc.

Pure gold watching this. Really useful information here! I’d love to see a breakdown with tax and NI with a limited company and a day job (full time) if it’s in the pipelines 🙂

This video is absolutely excellent. I have returned to it so many times over the past year. Brilliantly put together, clear and concise. Jolly good show old chap! Hopefully you can do the same every year! Much appreciated.

Absolute gold! I finally understand why my accountant uses certain figures on my returns. Thank you so much!

An additional point to bear in mind is that once your income passes 100k you gradually lose your personal allowance, so your marginal tax rate effectively feels like 60% for a while (40% plus the 20% you’re repaying on the lost PA). Some people at this level limit their income or do salary sacrifice to stay at or under 100k or spread dividend payments out to the next tax year.

What awesome content Darren; Seems like you've been presenting for years, really well delivered and recieved. Thanks my man! Bob :)

This was so easy to understand, I think it's a benefit for us/me that you're not an accountant!! You made something hard to understand so digestible and easy to grasp. Thanks so much!!!!

This video is great! So clear, it's cleared up a lot of questions I had and given me some extra knowledge I didn't know I needed. One question however...how does this apply to side hustles? So for example: someone earns £30k for their day job, what's the best course of action then?

Great stuff, brother 👏. You've done all of us a great service. Sure beats the hell out of going to the tax office.

Hi Darren, thank you for this useful video and amazing content. What is your opinion if some is already employed (so already paying tax at 20 or 40 percent and already beyond personal allowance) and wants to earn extra money..would it be better to use ltd company or sole trader?

Great video and really enjoying the others on your channel. Quick question, what's your views on taking money out as Directors Loans?

That was put across in an easy to understand way. Good to know how much can be saved via running your own business. Would be interesting to see how this works (dividends side of things) with others being a part of the business, such as a spouse or family member.

This is a great video, well done. Question: Is it possible to pay yourself solely via dividends and nothing via salary? (tax free allowance used up via other income sources, ie rental incomes). In my question there would be no salaries paid out from the ltd company, only dividends to shareholders.

This is amazing! A complete breakdown and straight to the point! This kind of content is so needed

Hi Darren, it is really a very helpful video. Thanks a lot. I got stuck at the stage of setting up my own pension scheme. How am I going to get any pension plan contributions if I go for the Lower Earnings Limit threshold? Do you mean to register as an employer at one of the pension providers such as NEST?

This level of simplicity in explanation (without jargon) is what I've been looking for almost a year. Two questions 1)can you please explain how an electric car purchase works out in an ltd company scenario? 2)do you recommend using an online tool (like QuickBooks) instead of an accountant for ltd company tax needs?

Great explanation thanks. It’s worth also considering the Employment Allowance that can exempt the employer from upto £4000 of NI contributions allowing the full £12500 to be taken as salary.

Excellent video! Really enjoy all of your videos so far - found you today and subscribed instantly! One small point is that Employers NI is tax deductible for corporation tax purposes so there is a CT saving of £818 if paying yourself via PAYE which would bring the 'Worse Off' figure to £4,805.34 rather than £5,623.71.

Some life changing information in this presentation, I'm working towards LTD Company and have spent some time typing out the information from this presentation and have delved into a Lawpack book to get the rest. The Pension bit was really helpful and I'm always dubious about giving money to someone who isn't necessary going to look after my needs as I get older. I'm now going to start paying myself a salary and grasp the bookkeeping in more depth. An excellent 10/10 presentation!!!

I’m really thankful. I’m just starting my limited company with similar figures to your example and this was clear and exhaustive. Thank you, I will definitely follow after this.. Thank you for taking the time to make this video and the clear presentation. 👍

Great video, very high quality. As you increase salary the dividend and corporate tax reduce, While the national insurance increases: Dividend tax + Corporation tax = 7,5% + 19% = 26.5%, National insurance = 12%+13.8% = 25,8% So isn't 26,500 the best amount? (Salary - Threshold to start paying dividend tax)

This was brilliantly explained, clear and without any waffling. Thank you

Great video Darren, thank you so much. At risk of asking a silly question here but as you can only draw the additional dividends from last years profit, do you have to wait a year when you first set up? I'm just thinking how it would work from a cash flow perspective if I was only paying myself the basic salary for the first year i'd find it hard to pay my bills and live? If that makes sense

Thanks for the excellent explanation Darren, as a new sole director of a limited company I found it easy to grasp in plain English, nice and simple. One query though, I've seen somewhere that the flat rate HMRC allowance for using your home as an office has gone up to £6 p.w,/£26 p.m. for 2020/21. Is that correct?

Thanks Darren, your videos are great. I gather that Directors are classed as employees and pay Class 1 primary National Insurance on annual income from salary and bonuses over £9,500. The company will pay Employer's class 1 NI contributions on salaries over this level. If the Director in question already has an existing full time job and a salary which they already class 1 employee's NI on then would this affect the above or would their pay as a Director still be exempt from NI up to the £9,500 threshold? It does not seem clear whether the existing salary means that the Director (and company) would pay NI on all of their director's salary due to them having an existing salary from their job which attracts NI contributions already. Thanks

Very informative thanks, but, if I’ve modelled this correctly in Excel, paying salary of £9,500 and dividends of £30,500 delivers a slightly higher net figure of £32,194.24 (a whopping £37.78 more to blow on living the high life :)). By my reckoning this would incur £5,795 corporation, £98.26 business NI and £1,912.50 dividend tax.

Thank you Darren, it is a very informative video. What is your general opinion for someone who is already earning on the higher-rate tax band to get into selling on Amazon or any e-commerce platform - as sole trader (all profits income taxable and NI payable) or limited company (only dividends, no directors salary)? It looks like a combined corporation tax and dividend tax (at higher-tax band) is as much as the income tax, or am I missing a point?

So helpful to have to up to date information explained in a straight forward way. Would be great if you could make a video on self employed VS limited company.

This video has answered so many questions that I have had while setting up a limited company and trading for the first three months. Grateful thanks.

Great video. It's bit quick but provides real good information. I made a simple excel file and now I know how to compare (Salary+Dividend) vs PAYE for different levels of payment to Director.

Explained very well. Makes things a lot simpler. Would appreciate if you could do a video regarding planning for pension efficiently.

Fantastic video! Very informative. A question about business expense, if you don't mind: can you claim back PPC advertising costs as a business expense??

Thank you, the paye vs divi calculation was interesting. Lines up with what I've been told but it's the first time I've fully understood it.

Really informative, thank you. From what I can gather, the same 40k wage for a sole-trader would take home £31,596.40, with almost 3k just for NI contributions? At what kind of salary does it make sense to switch up legal entities?

Excellent video! Really well explained, straight to the point and engaging. Brilliant! New subscriber! 👍🏽

Great video... you may need to rephrase the mileage claim from HMRC as the 45p upto 10k miles is the taxable allowance. So you don’t literally get £4500.

Really good video. But one thing I thought of, wouldn’t the employers NI contribution be liable for CT relief as an allowable expense. So there would be a 19% saving on employer’s expense. Either way I know it’s still going to be more expensive.

Absolute quality, you have just made our decisions for us, great video for those of us new to running our own companies - huge thanks

Top class video & I like that you add back the corporation tax into the calculations as it before dividends. Comparing this to PAYE as well very informative. keep up the great content.

Love this video, awesome explanation. I'm reading Ramit Sethi's book at the moment which is great but its US focused and also doesn't cover anything from a limited company point of view. I am trying to get my head around these limits vs living expenses and investing. Ideally I'd stay under these limits you have mentioned but if I am paying say 1k in rent and 1k in living expences per month plus trying to put money into investments and pension, this all takes me way over the allowance. Is there a smart way that you allocate your funds whilst keeping under these limits? Thanks in advance!

I've just spent two agonizing days setting up a Ltd and sorting out VAT registration. Flying totally solo and trying to learn as much as possible. Thank goodness I found this video! AMAZING information, thank you so much for sharing this information.

What you have not mentioned, Darren, is the impact of paying a lower wage has on the corporation tax bill, cancelling out savings made on NI bill.

Awesome video Darren, very well explained and to the point. Can you do a video explaining the differences when you have multiple streams of income and you run more than one limited company. As you mentioned on the Director’s Salary Slide at around 8:20 this example is with no other employment or income. Looking forward to seeing more great videos. Thanks

Absolutely brilliant video! Well explained, concise and to the point!

This is a great content. Could you expand on how to implement to this payment scheme a pension plan?

Could you do a video covering the different types of expenses we can claim against tax? Thanks x

Really helpful! Thank you! I would also like to know about filling my self assessment, I use exactly this method when paying my self and my wife, but should I be declaring only my dividend income on my self assessment because my PAYE income is already declared through PAYE?

Just thinking of starting a business and this level of clarity is invaluable. Thanks so much.

Great video, this is why I recommend getting an accountant, so many people I know are paying way more than they need to. The number of people I know who pay themselves just through a salary and not through a limited company through dividends. You have got to remember, if like me you work a lot of hours owning your own business, often way more than anyone who works 9-5 does, you want to at least take home as much as possible for all the hard work you put in and longer days and nights.

Thank you Darren, I’ve just subscribed. Very helpful video. One question....although my wife and I are both directors of my limited company, I also own two buy to let’s and have a £2500 per year pension coming in. This all eats into my £12500 allowance so can I still pay myself the £8784 per year or would I be better off paying myself less please?

Thank you! Great explanation and examples. All well explained and structured

Great video, really helps break it down. I went through the example myself and am a bit confused on one thing, Shouldn’t the amount subject to dividend tax be £19568.96 (( profit after salary of 31216 - corp tax 5931.04) - 5716 remainder of personal allowance) as 8784 has been paid in salary not dividend? You have calculated dividend tax on difference between 14500 to 40k when it should be 14500 to 25284.96 as 14715.04 was paid in salary and corporation tax. I hope that makes sense, I would really appreciate a reply as I have been racking my brains over this for hours lol.

Eventually, someone can explain this very clearly and simply. For years I didn't know how it works and simply left it to my accountant and he, now I'm thinking, didn't do a great job. Many thanks.

Perfect video. Thank you. I just wanted to ask, is it possible to pay dividends to shareholders on a monthly basis? I understand dividends can only be given after Corp tax, so how will you go about paying dividends monthly? Thank you

This is great content. I've hit the like and subscribe. So well explained too. I've been taking salary above the NI threshold and my accountant didn't even tell me! Staying tuned for more great content 😀

I've been doing my own accountancy for a limited company for the last 7 years so I know what you are talking about. Amazing that you can cover everything in 12 mins. Very competent. Wish I'd heard this 7 years ago.

Very informative video. I`m the sole owner and the director of a limited company with only one other employee and our monthly PAYE bill is just too high. Now I think I know why and will speak to my accountant about this asap. It`s very difficult to survive for a company (especially if you`re VAT registered) in the current economic climate and any helpful advice to legally reduce those tax, VAT and PAYE bills is much appreciated

Good video. A lot of my clients (I'm an accountant) are brilliant at running their business but their eyes start to glaze over when discussing this level of detail.