Effective Remuneration for Directors

Directors are in a privileged position as in many cases they are not bound by the provisions of regulations relating to minimum/living wage, working time directives and auto enrollment pensions where a contract of employment is not in place.

This allows them to manage their income in ways that are responsive to the commercial requirements of their business (such as cash flow planning) and also to exploit tax planning opportunities.

It has long been perceived wisdom that a low salary supplemented by dividends was the most tax effective remuneration method.  However, changes that came into place from 1 April 2016 often referred to as the ‘dividend tax’ have led many people to question that wisdom.

Similarly, the introduction of hybrid cars that has the twin gains of 100% capital allowances for the business coupled with low benefits in kind means that a company car may well be an attractive option.

The use of schemes such as cycle to work, childcare vouchers and health care schemes can also be used to provide a tax effective remuneration scheme for directors that is also totally responsive to their personal requirements.

We would recommend that you look at your remuneration strategy and ensure that you are maximising the return to you while minimising the tax liability to your business.