2 October 2026
To take dividends or not take dividends……………we don’t think Shakespeare ever faced such as question, but we do on a regular basis from business owners.
As with any question like this, there is a general view that a small salary up to the personal allowance and then dividends can prove to be slightly more tax efficient but ultimately it depends upon individual situations which generally are rarely the same over businesses and individual circumstances.
To give the most accurate answers, a tax adviser needs to consider factors such as
- The amount of income the individual needs.
- Whether the company is undertaking R&D activities.
- Whether the company has reserves to pay dividends.
- Whether the salary paid is wholly and exclusively for trade purposes.
- The rate at which the company pays corporate tax.
- Whether there are other shareholders in the business.
- Whether the company is at risk of making losses in the current or future years.
Once there is a complete picture of the personal and business circumstances, then an answer can be given.
There may be a consideration of other options of taking money from the income, via either directors loan interest (if there is a credit loan account) or rental income, if the director owns a property used by the business. Again, both of these factors require some consideration.
As ever, if you would like to chat with us, you can contact us here.
