For a while, company directors have been able to make a tax-efficient living by taking a combination of salary and dividends due to the generous Dividend Allowance.
However, changes which took effect from 6 April 2018 have cut the allowance from £5,000 to just £2,000.
The changes are meant to level the playing field between the self-employed, directors, shareholders and employees.
In real terms, the cut will cost directors anywhere from £225 to £1,143 a year, depending on which tax bracket they fall into. Taking dividends rather than (or in addition to) salary may still be your best option if you own a company, and we will of course discuss this with you if we’re preparing company accounts for you.
