What can you take tax free and at the lower rate of tax?

It’s a good idea to think about whether you have fully maximised the amount you can withdraw from the company tax free and at the basic rate of dividend tax. Assuming your company makes sufficient profits, the total tax free amount you can withdraw, not including other sources of income and using our recommended low wage/higher dividend split, for the year ended 5th April 2025 is £13,570. You can take a further £36,700 of dividends at the 8.75% dividend tax rate and before the higher rate of 33.75% is charged.

• If you pay yourself £9,096 per year from your company, you could take a total of £41,174 worth of dividends during the year.
• If you pay yourself £12,570 per year from your company, you could take a total of £37,700 worth of dividends during the year.

All salary / dividend splits above will incur an estimated £3,255 personal tax liability due 31st January 2026, not considering the payments on account and additional income and expenses. If you have additional income such as rental income or other employment income, this will reduce the amount of dividends you can take, before higher rate tax is charged.

When do you need to make dividend payments by?

Final dividends MUST be paid, on or before the 5th April 2025 or they will not be included in the current financial years calculations and you may lose certain allowances.

What should you take?

In most scenario's it makes sense to withdraw as much money from the company at the lower tax rates, rather than let any reserves build up for a future year as your circumstances can easily change, as can the tax rates. However, there are certain things that will reduce or restrict the tax free allowance of £13,570 and the additional basic rate dividends of £36,700.

You must have sufficient reserves in the company, before making dividend payments.

Is there any further reading?

We have a few blogs to provide further reading on tax allowances, dividends and other tax rates:

• ‍What are dividends and how are they taxed?‍
• UK dividend tax rates and thresholds for 2024/25‍
• NMW and NLW rates increase from 1st April 2025‍
• New Child Benefit tax rates from 6th April 2025

What additional help is there?

Prior to the financial year end, you might be considering pensions and investments to be tax efficient personally, or through your company.  Whilst we are not financial advisors and therefore, cannot advise on pensions and investments, we do partner with a very trusted firm of financial advisors. Please let your accountant know and they will send a referral over.

If in doubt, speak with your accountant.

Please let your dedicated accountant know if you need to discuss this in further detail or book a call. If you would like specific advice on how much you could take in dividends, please ensure all bookkeeping is up to date and you have access to any other income you might be earning in advance of the call. Please ensure this is in advance

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