Case Study: £60,000 Company Profit

April 6, 2025 • 8 min read

£60,000 is a pivotal number.

It is above the £50k Small Profits Rate threshold (Corporation Tax rises).
It creates enough income to push a director into the Higher Rate tax band if not careful.

This case study shows how to prevent "tax leakage" at this level.

The Corporation Tax "Marginal Relief" Trap

Since your profit is above £50,000, you are in the Marginal Relief band.

First £50k is taxed at 19%.
The chunk between £50k and £250k is effectively taxed at 26.5%.

Step 1: Reduce Taxable Profit

The goal is to get Taxable Profit below £50,000 to stick to the 19% rate.

Strategy:

Salary: £12,570.
Employer NIC: £1,135.
Total Salary Cost: £13,705.
Taxable Profit: £60,000 - £13,705 = £46,295.

Success! Because the salary cost reduced profit below £50k, the company pays just 19% Corporation Tax.

CT Bill: £46,295 * 19% = £8,796.

Step 2: Distribution

Distributable Profit: £46,295 - £8,796 = £37,499.
We declare a dividend of £37,499.

Step 3: Personal Tax (The Higher Rate Check)

Salary: £12,570.
Dividends: £37,499.
Total Income: £50,069.

The Higher Rate Threshold is £50,270.

You are £201 below the threshold.
This is perfect efficiency. You are engaging the full Basic Rate band (8.75%) without paying a penny at Higher Rate (33.75%).

Tax Calculation

Personal Allowance: £12,570 (Covered).
Dividend Allowance: £500 (Free).
Taxable Dividends: £36,999.
Tax @ 8.75%: £36,999 * 8.75% = £3,237.

Final Result

| Item | Amount | | :--- | :--- | | Total Cash Out | £50,069 | | Personal Tax | -£3,237 | | Net Cash | £46,832 |

Total Tax Paid: £1,135 (NIC) + £8,796 (CT) + £3,237 (IT) = £13,168.
Effective Tax Rate: ~22%.

What if I had no expenses?

If you did not take a salary, your profit would remain £60,000.

CT: You would pay 19% on first £50k, and 26.5% on the remaining £10k.
Higher Rate: The larger dividend would push you into the Higher Rate tax band, costing an extra 25% on that slice.
Taking a Salary is crucial here.

Key Takeaway

At £60k profit, the "Salary + Dividend" method is highly effective because the salary deduction keeps your corporation tax low (19%) and your personal income just under the Higher Rate threshold.