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0113 246 1234

Salary vs Dividends – Changes from April

By balancing your salary and the dividends you receive you can typically mitigate the amount of tax you pay each year by benefitting from additional allowances and lower rates of tax.

Every taxpayer has a tax-free dividend allowance of £2,000. Any dividend income over this amount will be taxed at your marginal rate as follows:

However, from April this year, the amount of tax-free divided allowance available to you will fall to £1,000, before dropping again to £500 from April 2024.

Finding the right combination of salary vs dividends often relies on several factors, such as:

To accumulate qualifying years for the state pension your salary must be at or above the NIC Lower Earnings Limit.

If you earn more than the NIC Primary Threshold you will have to pay NICs from your salary.

You will also start to pay income tax on your salaried earnings above the personal tax allowance.

Setting the right salary for yourself can be tricky, but it is likely to be all the more challenging given the upcoming change to the tax-free divided allowance.

If you are unsure of the most tax efficient method of drawing earnings from your company from April, speak to our team today for advice.


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