Same old question, should I take a small salary and get paid by dividend? There were changes of tax on dividends after April 2016, however, the answer for 2017/18 is still yes. There are several scenarios.
|2017/18||option 1||option 2|
|Total gross income||£45,000||£45,000|
|Tax on dividends||-£2,138||-£2,138|
|Total take home income||£42,001||£42,862|
|Total take home income (if claiming Employment Allowance)||£42,462||£42,862|
You are better off paying a salary of £8164 and dividend of £36,836 as shown in Option 2. If you are an owner-manager or a contractor, who does not have access to the Employment Allowance, you can save more.
The example above is based on assumptions listed above. There are other things to consider when you make your financial decisions, such as
After changes in dividend tax, free allocation of personal allowance can save you tax. Your tax calculator will not tell you that, because the automatic system offsets allowances and reliefs in order. Contact us now to discuss your specific situation.
Our next article will give examples to show you the way most favourable to the taxpayers.
(last edited on 25 May 2017)
The above information and calculations are for illustrative purposes only. No liability is accepted by O’Brien S & Co Ltd for any actions or losses from investment in reliance on the information and calculations. Consult a qualified professional financial advisor before making any financial decisions. O’Brien S & Co Ltd holds the copyrights in all materials on the website. All rights reserved.