There are £26.6 billion of pensions in the UK which remain unclaimed by 2.8 million savers. That’s an average of £9,500 per saver (ref. Pensions Policy Institute Autumn 22).

The last time I moved house I had 4 different pensions which needed contact details updating, it wasn’t great fun but I got it done.

It’s not a much of a stretch to see that anyone in poor health or not so hot on admin may have forgotten to do this amidst the upheaval.

Keep your pension details up to date, make sure your employees know that they are personally responsible for keeping their pension details up to date and help your nearest and dearest keep theirs up to date to.

So is it still worth paying dividends or just pay a bonus?

I’m really interested in this, so I’ve been thinking about this, had a dig and thought I’d share with you what I’ve found.

This is an important question for those of you who are company directors or have employees with shares. Historically dividends were generally seen as a tax efficient way of employee shareholders (including directors)  taking money out of a company.

HMRC have made changes to both corporation tax and personal tax which are narrowing the gap. If you company is going to make a profit is it more tax efficient to have a bonus in your pay packet or issue dividends?

If you have a bonus:

There could be a combination of additional personal tax and NI and employers NI (depending on your gross salary). The personal tax allowance is frozen for 23-24 at £12,570.

The company does not pay corporation tax on the bonus.

If you take dividends:

The dividend you take will be net of corporation tax.

HMRC have increased the corporation tax rate from 19% for profits over 50k to 25% with marginal relief up to £250k (so there effectively is a sliding scale of CT rates between 50K and 250K profits).

For the tax year 23/24 HMRC have reduced the tax allowance on dividends to £1000. For a basic rate tax payer (£12,750 to £50,270) the tax on dividends is 8.75%. Higher rate tax is at 33.75% (£50,271 to £125,140) and additional rate at 39.35%.  

The wonderful Stephen Relf at Croner-I has done some work on this and has produced a very useful sample calculation. I won’t bore you with the details, here is the summary:

Company Profit £500K (before bonus paid)

Bonus / Dividend Available £40K (before CT / Employers NI)

For someone falling in the Higher Rate tax band he calculated:

23/24 the dividend route gave a tax advantage of £173.

22/23 the dividend route gave a tax advantage of £2138.

In conclusion Stephen Relf states that much depends on individual circumstances but there are broad principals in mind, that dividends are more likely to be tax efficient where the company continues to pay CT at 19% or where the recipient is a basic tax payer.   

For further reading please refer to Croner-I Extracting Profits, Paying and Receiving Dividends.