Millward, May & Co - Wokingham Accountants
Wokingham Accountants

Sole director/shareholder

Salary & Dividends

For 2019/20, what is the best salary and dividend combination to take if:

  • You’re a sole director/shareholder or your total employers national insurance bill is over £3,000.

  • 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 2019 and 31 March 2020, I’ll have until 31 January 2021 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 7.5% 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: £8,632

Month: £719

Tax: Nil


Dividends (Tax Free)

Year: £5,868 = £3,868 (£12,500 personal allowance less £8,632) + £2,000 (dividend allowance)

Month: £489

Tax: Nil


Dividends (7.5%)

Year: £35,500 = £50,000 basic rate band - £14,500 (£12,500 personal allowance + £2,000 dividend allowance)

Month: £3,125

Year Tax: £2,663 (£35,500 @ 7.5% dividend tax)

Month Tax: £222 (2,958 @ 7.5% dividend tax)


Dividends (32.5%)

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

Month: £4,167

Year Tax: £16,250 (£50,000 @ 32.5% dividend tax)

Month Tax: £1,354 (£4,167 @ 32.5% 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 £50,000 per year if you can (see example 1 below). Anything above that, we’d suggest avoiding the 32.5% personal dividend tax rate:

  • Leaving money in the business, click here for our page on company tax planning.

  • Paying into a pension instead, we recommend arranging a meeting with Jim Monger, click here for more details.


Example 1

How much am I taxed on £50,000 (i.e. £8,632 salary, £41,368 dividend)?

  • £8,632 salary @ 0%

  • £5,868 dividend @ 0%

  • £35,500 dividend @ 7.5% = £3,125

I therefore take out £50,000 from the business and pay £3,125 in personal dividend tax.


Example 2

How much am I taxed on £100,000 (i.e. £8,632 salary, £91,368 dividend)?

  • £8,632 salary @ 0%

  • £5,868 dividend @ 0%

  • £35,500 dividend @ 7.5% = £3,125

  • £50,000 dividend @ 32.5% = £16,250

I therefore take out £100,000 from the business and pay £19,375 (£3,125 + £16,250) in personal dividend tax.


Example 3

How much am I taxed on £75,000 (i.e. £8,632 salary, £66,368 dividend)?

  • £8,632 salary @ 0%

  • £5,868 dividend @ 0%

  • £35,500 dividend @ 7.5% = £3,125

  • £25,000 dividend @ 32.5% = £8,125

I therefore take out £75,000 from the business and pay £11,250 (£3,125 + £8,125) in personal dividend tax.


Example 4

How much am I taxed on £25,000 (i.e. £8,632 salary, £16,368 dividend)?

  • £8,632 salary @ 0%

  • £5,868 dividend @ 0%

  • £10,500 dividend @ 7.5% = £788

I therefore take out £25,000 from the business and pay £788 in personal dividend tax.