Maximise Your Paycheck Unleashing the True Value of Business Owners

4 Aug 2023 · 1 min

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In this monologue, the speaker advises small business owners on the most tax‑efficient way to pay themselves. He recommends setting a low earnings threshold (around £12,500 per year) and taking any additional income as dividends, while proactively allocating funds for VAT, corporation tax, PAYE, and National Insurance using the Profit First methodology by Mike Michalowicz. He argues that business owners are worth more than a modest £1,000 monthly salary and should not rely on accountants who only perform backward‑looking calculations that can result in unexpected large corporation tax bills at year‑end. The speaker criticises such reactive accounting practices as irresponsible and emphasizes the need for owners to understand dividend calculations and plan taxes ahead of time.

Chapters

The most tax-efficient way of paying yourself would naturally be lower earnings threshold, £12,500 a year, and then anything extra you pay dividends, making sure that you're safe. If you were to look at something like Profit First by Mike Michalowicz, which is a fantastic book, you will then be setting aside money for VAT, money for corporation tax, money for PAYE and National Insurance contributions. All accountants will tell you to do that. It's the most tax-efficient way to do it. And this is where me and them differ, because I believe that as a business owner, you're worth more than £1,000 a month. Okay, quite frankly. And yes, you can pay yourself some extra dividends, etc., etc. But the challenge is most business owners don't understand how to calculate their dividends. So what happens is you get to the end of the year and you might have a bit of a surplus in your accounts, but then you do— the accountant does all these backward-looking calculations. They give you a huge great big corporation tax bill, which comes as a bit of a shock for most business owners. For me, I find that irresponsible on the part of the accountants.