Autumn Budget 2024: Impact For Sole Director Limited Companies
The Autumn Budget affects how you pay yourself a salary for those who operate as a Sole Director Limited Company. Let’s explore what’s changed and the options
If you operate as a sole director limited company and only employee, you might already be taking a ‘tax-efficient’ split of salary and dividends to manage your income and receive a qualifying year towards full state pension.
For 2024/25, common salary scenarios might look like this 👇
➡️ £9,100/year (£758.33/month): Just enough to qualify for a full state pension without triggering Employer NICs.
➡️ £12,570/year (£1,047.50/month): Making full use of your personal allowance, with Employer NICs of £478.86 (offset against corporation tax).
The Autumn Budget Impact for Sole Director Limited Companies
Here’s what’s changing from April 2025 based on the Autumn Budget👇
💫 Employer NIC Threshold is Lowering
The threshold will drop from £9,100 to £5,000. This means any salary over £5,000 will now incur Employer NICs.
💫 Employer NIC Rate is Increasing
The rate of Employer NICs will rise from 13.8% to 15%.
So, if you continue to pay yourself a salary in line with 2024/25 your NICs liability would increase significantly.
For example: if you pay yourself £12,570 in 2025/26, the Employer NICs you’ll owe will rise to £1,135.50 (compared to £478.86 now), you will still be able to offset them against corporation tax.
💫 Dividends
No change to tax rates, but the dividend allowance is now just £500/year, so most dividends will be taxable.
💫 Employer Allowance Increases from £5,000 to £10,500
If you can bring on an additional employee (e.g., part-time admin or support), you could become eligible for the Employer Allowance, which will cover up to £10,500 of Employer NICs.
This could eliminate your NIC liability entirely – find out more in our article specifically on Autumn Budget 2024 implications for employers.
However, of course, hiring someone brings wider considerations beyond just tax savings.
What’s going to be ‘tax efficient’ for sole director limited companies?
➡️ If nothing else changes in your structure, if the goal is to reduce NIC costs in 2025/26, you might lower your salary to £5,000/year (£416.67/month). This eliminates NICs but is too low to qualify for full state pension – to qualify you would need to increase it to £6,500/year (£541.67/month) and pay £225 NICs).
Whether to stick with a higher salary or rely more on dividends will depend on your company’s profit levels, tax planning strategy and ethical stance on paying NICs.
Note: This is just general guidance (as at November 2024)- specific professional advice is key to finding a solution that works for your circumstances.
Harriet Formby MA ACA is a Chartered Accountant, Fractional CFO and Business Mentor helping small businesses, SMEs and start-ups dedicated to changing the world for the better.
After growing disillusioned with making and managing money for faceless entities, she left the big corporate world of finance and founded Below The Line Finance in 2020 and shortly after Get Number Savvy.
Via 1:1 consultations, CFO retainers, courses, workshops and resources for companies with both micro and £1m+ budgets, she brings a more human side to finances, helping people not only see that they can make profit in an ethical way, but helping them get there too.
Clients regularly tell Harriet they’ve never had a CFO who ‘gets it’ like her, which is only strengthened when they find out that she works ‘off-grid’ by a beautiful meadow and meandering stream surrounded by a herd of retired racehorses, pet sheep, Dartmoor ponies, a rich array of wildlife and always with a dog or two close by.
