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Most effective salary / dividend combination in 2019/20.

Updated: Sep 18, 2019

Limited Company Directors - Salary and Dividends 2019/20

To achieve the most tax efficient way of extracting money from your limited company you should consider a mix of salary and dividends.


How much salary should you pay?

From April 2019 you can pay yourself a salary of £719 / month without paying any tax or NI.

If you choose this option:

· You receive National Insurance Credits towards some benefits for example state pension

· You must be registered as an employer

· You must file an RTI (real time information) return to HMRC each pay period

· No income tax or national insurance is due on a salary at this level

· For the majority, this is the most tax efficient way of paying yourself from your company


Dividends – from April 2019

Any dividends paid over £2,000 will attract dividend tax.

The rates of tax will be:

· First £2,000 of dividends – tax free

· 7.5 % for dividends falling within basic rate tax (caution on how this is calculated)

· 32.5% for dividends falling within higher rate tax (which will be over £50,000 from April 2019)

· 38.1% for dividends falling within the additional rate of tax with income over £100,000 meaning restrictions on your personal allowance




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