What tax do I pay on dividends from my company?

What tax do I pay on dividends from my limited company?

As the owner of your own limited company, you may be wondering what tax do I pay on my dividends? Firstly, you are personally liable for income tax on any income you receive from your company and for the 2018/19 tax year , you will pay tax as follows:

  • First £2,000 of dividends - no tax
  • 7.5% tax on dividends falling within the basic rate tax band
  • 32.5% on dividends falling within the higher rate tax band
  • 38.1% on dividends falling within the additional rate tax band

Your dividend income is added to any other income yo have received to determine which tax band they fall into.

Here's an example using the 2018/19 tax rates

Let's assume this is your only income:

Salary: £8,500

Dividends £50,000

The personal allowance is £11,850 which means you pay no tax on the first £11,850 of your income, in addition there is no income tax on the first £2,000 of dividend income. Therefore, you have not tax to pay on your salary and £5,350 of your dividends. The remaining dividend would be taxed as follows:

£34,500 taxed at 7.5% = £2,587.50

£10,150 taxed at 32.5% = £3,298.75

Total tax to pay = £5,886.25

This is just an illustration and should not be relied on as advice. Not everyone's circumstances are the same and so we recommend that you seek the advice of a suitability qualified professional before making any tax planning decisions.

There is a lot to consider when planning your remuneration as the owner of your own limited company and many way in which you can make this more tax efficient. IF you want further information, or a chat, about the ways in which we could save you tax, simply get in touch to book a FREE consultation.