Dividend tax

How dividends are taxed on the shareholder. Lower rates, no National Insurance.

What it means

Dividends are taxed at rates that differ from income tax rates, after a dividend allowance, and carry no National Insurance.

Why it matters

The absence of National Insurance is why owner-directors take a small salary and the rest in dividends. The allowance has been cut repeatedly, which changes the arithmetic.

What it looks like in practice

Dividends are paid from post-corporation tax profit, so the total tax is corporation tax plus dividend tax. Compare that combined figure against salary, not the dividend rate alone.

What to watch out for

Assuming last year's split is still optimal. Rates, allowances and corporation tax have all moved recently, and the answer has moved with them.

Where to get proper advice

GOV.UK for the current rates and thresholds, which move most years. Your accountant before acting — this is exactly the kind of question a fee is for.