Millward, May & Co - Wokingham Accountants
Wokingham Accountants

Sole director/shareholder

Salary & Dividends

For 2022/23, what is the best salary and dividend combination to take if:

  • You’re a sole director/shareholder

  • Your only income is from your limited company

  • You’re not of pensionable age

Please note:

  • The tax listed below is payable personally (not from your company) by 31 January following the end of the 5 April tax year (e.g. I receive two tranches of dividends on 31 October 2022 and 31 March 2023, I’ll have until 31 January 2024 to pay the personal tax on these).

  • These figures only show your personal tax - this doesn’t take into consideration corporation tax payable by your company which will be due in addition to the personal tax payable.

  • The figures below are cumulative (e.g. the 8.75% dividend rate assumes you’ve already used up your tax free salary & dividend rates). See the examples at the bottom of this page for clarification.

Salary (Tax Free)

Year: £12,570

Month: £1,048

Personal Tax: Nil

Dividends (Tax Free)

Year: £2,000 (dividend allowance)

Month: £166

Personal Tax: Nil

Dividends (8.75%)

Year: £35,700 = £37,700 basic rate band - - £2,000 dividend allowance

Month: £2,975

Personal Tax - Year: £3,124 (£35,700 @ 8.75% dividend tax)

Personal Tax - Month: £260 (£2,975 @ 8.75% dividend tax)

Dividends (33.75%)

Year: £49,730 (£100,000 personal allowance threshold - £50,270 basic rate band)

Month: £4,144

Year Tax: £16,783 (£49,730 @ 33.75% dividend tax)

Month Tax: £1,399 (£4,144 @ 33.75% dividend tax)

General Advice

If you earn over £100,000, please speak to us.

If you don’t earn over £100,000, the general advice we give people is to pay themselves up to £50,270 per year if you can (see example 1 below). Anything above that, we’d suggest avoiding the 33.75% personal dividend tax rate by:

  • Leaving money in the business and paying out dividends in a different tax year

  • Paying into a pension instead which would also reduce your corporation tax bill. We recommend arranging a meeting with an IFA: www.millwardmay.co.uk/independent-financial-advisor

Example 1

How much am I personally taxed on £50,270 (i.e. £12,570 salary, £37,700 dividend)?

  • £12,570 salary @ 0%

  • £2,000 dividend @ 0%

  • £35,700 dividend @ 8.75% = £3,124

I therefore take out £50,270 from the business and pay £3,124 in personal dividend tax.

Example 2

How much am I taxed on £100,000 (i.e. £12,570 salary, £87,430 dividend)?

  • £12,570 salary @ 0%

  • £2,000 dividend @ 0%

  • £35,700 dividend @ 8.75% = £3,124

  • £49,730 dividend @ 33.75% = £16,784

I therefore take out £100,000 from the business and pay £19,908 (£3,124 + £16,784) in personal dividend tax.