Do you know how much tax you should be paying on your dividends? You can find out by watching our video or reading about it below.
How much tax do I pay on my dividends?
If you are an owner of a limited company, the most tax efficient way to pay yourself is through a small salary, with the rest in dividends.
What are the tax rules for the 2018/19 tax year?
The dividend allowance is £2,000. This means that the first £2,000 of dividends that you extract are tax free.
The personal allowance is £11,850. If any of this allowance has not been used it can be allocated against your dividend income.
What rate will my dividends be taxed at?
Dividends in the basic tax band which is up to £46,350 of income will be taxed at 7.5%
Dividends in the higher tax band which is between £46,350 and £150,000 of income will be taxed at 32.5%
Dividends in the higher tax band which exceeds £150,000 of income will be taxed at 38.1%.
What do you need to consider?
If you have any other income such as employment or property income, you need to remember that dividends are taxed last. This means you will have to factor in your other income first before you work out which tax band your dividends fall in to.
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