1) The level of pensions you wish to make

In general terms, the Director can select how his remuneration is paid by the company in terms of salary and pension contributions.

This should normally be agreed at the start of the financial/fiscal year and the appropriate minutes of meeting drawn up.

Please note however that regardless to your salary level you can now contribute £3,600 per annum to your pension.

2) Your national insurance contributions.

Most individuals will wish to maintain their national insurance contributions for State Benefit purposes.

The link between national insurance contributions and benefits is very complicated however to maintain the minimum level of contributions you need to take a salary of greater than £110 per week i.e. £5,715 per annum.

3) Your monthly cash requirement.

Many individuals decide to set a salary, which will provide them with a monthly net pay sufficient to fulfil their monthly financial obligations.

If your salary is insufficient to meet your monthly financial obligations then it is likely that this shortfall will have to be met by drawing monthly dividends. Whilst there is nothing wrong with paying dividends monthly it is vitally important that you ensure such dividends (as is the case with all dividends drawn) are legal. Please read our advice to ensure dividend payments are legal.

4) How concerned you are about HM Revenue & Customs selecting your company to carry out a review or tax investigation e.g. to review your IR35 status.

We quote from HMRC manual, which contains instructions for HMRC Inspectors:

Referring to the use of service companies “When examining accounts, Inspectors should look out for attempts to avoid or delay payment of schedule E Tax and Class 1 National Insurance Contributions by means of arrangement under which directors or employees are remunerated for services provided typically by way of – a small wage or salary in order to meet the minimum amount of national insurance contributions necessary to qualify for benefits and – large dividends”.

So it would appear that if you take a very small salary and take the majority of the money out of your company by the way of dividend then it is more likely that HMRC will select your company for review.

5) Your requirement to comply with the National Minimum Wage Regulations.

At present, this will not be a problem for most individuals since providing you are a director of the company and you do not have an explicit employment contract then the Minimum Wage Regulations will not apply to you.