The current £3,000 employment allowance continues to be set against the employer’s national insurance contribution (NIC) liability. If the company has not used this allowance it may be set against the employers NIC on directors’ salaries.
Meaning where the only employees are husband and wife there would generally be no PAYE or employers NIC on a salary up to the £12,500 personal allowance.
There would however still be employees NIC at 12% anything over £8,632 (£166 per week) which would be £464 on a £12,500 salary, leaving £12,036 net.
Traditional advice would then be to extract any additional profits from the company in the form of dividends. Where dividends fall within the basic rate band (now £37,500) the rate continues to be 7.5% after the £2,000 dividend allowance has been used.
A combination of £12,500 salary and £37,500 in dividends would result in £46,873 (93.7%) net of income tax and NICs.
The Companies Act requires that companies may only pay dividends out of distributable profits. This means that in the absence of brought forward reserves the company would need to provide for 19% corporation tax in order to pay the dividends and thus there would need to be profits of £92,593 in order to pay dividends of £75,000 (after providing corporation tax of £17,593).
Overall the combination of salary and dividends suggested above would result in net take-home amount of £93,746 for a couple.