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Maximising your 5th April 2020 tax allowances

As we are now in the new tax year, it is a good time to review the optimum tax strategy for 19/20, and what dividends you can take, before incurring higher rate tax.

Based on you taking a salary of £719 per month (£8,628 total for the year) from your limited company, you can take an additional £41,372 dividends for the year before higher rate tax is charged*.

Please ensure the company has sufficient profit to pay this level of dividends. 

This will bring you up to the higher rate tax limit and give you a tax liability of £2,662.50 due by 31st January 2021. As the payment due is over £1,000, a payment on account will also be required.

*If you anticipate any additional personal income such as rental property, interest, dividends from shares, benefit in kind or any other taxable income, please update your portal and provide the additional to your accountant and they will advise.

As a general guide (and based on only the £719 per month salary) here are the anticipated levels of tax due on specific levels of dividend payments:

Net Dividend Est Personal Tax Bill 2019/20

£10,000 £310
£20,000 £1,060
£30,000 £1,810
£40,000 £2,560
£50,000 £5,467
£60,000 £8,717
£70,000 £11,967
£80,000 £15,217

If you are a Scottish tax-payer, please click here as your income tax rates and allowances are different to the rest of the UK.Although the higher rate tax band is lower for Scottish tax-payers with respect to income tax, for the purposes of dividend taxation the higher tax band is the same as for the rest of the UK, at £50,000.

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