Income Tax And Dividends
- Adil Akhtar
- 7 minutes ago
- 17 min read
Mastering UK Income Tax Basics: Rates, Allowances, and Spotting Overpayments in 2025/26
Picture this: It’s a drizzly Tuesday evening in Manchester, and you’re nursing a cuppa while poring over your latest payslip. That nagging feeling hits – is HMRC taking a bit too much off the top? If you’re a UK taxpayer or business owner, you’re not alone. In the 2025/26 tax year, income tax pulls in around £330 billion for the Treasury, but here’s the kicker: millions are overpaying by an average of £700 each due to dodgy tax codes or overlooked allowances. As a tax accountant with over 18 years advising everyone from corner-shop owners in Leeds to tech startups in Cambridge, I’ve seen it time and again. Folks hand over cash they shouldn’t, only to claw it back months later. But it doesn’t have to be that way. This guide cuts through the fog, arming you with step-by-step checks, real calculations, and tailored tips to verify your liability – whether you’re on PAYE, self-employed, or juggling dividends from a side hustle.
The 2025/26 Income Tax Bands: What You’re Actually Paying
Let’s kick off with the essentials for 2025/26. Your personal allowance stays frozen at £12,570 – no change from last year, thanks to the Chancellor’s decision to hold thresholds until 2028. That means inflation’s stealthily shoving more of us into higher bands, a fiscal drag that’s bitten harder since the freezes kicked in back in 2021. For England, Wales, and Northern Ireland, the bands look like this:
Tax Band | Taxable Income Range (2025/26) | Rate | Notes |
Personal Allowance | Up to £12,570 | 0% | Tapers by £1 for every £2 over £100,000; zero at £125,140+ |
Basic Rate | £12,571 – £50,270 | 20% | Most common band for employees |
Higher Rate | £50,271 – £125,140 | 40% | Watch for child benefit charge if applicable |
Additional Rate | Over £125,140 | 45% | Applies to total income, including dividends |
Source: HMRC guidance, April 2025.
Now, if you’re in Scotland, it’s a different kettle of fish – devolved rates mean you could pay up to 3% more on higher earnings. I’ve had clients up in Edinburgh scratching their heads over this, especially with the new Starter rate band widened to £15,397. Wales aligns with the rest of the UK for now, but keep an eye on the Senedd – they’ve got powers to tweak if they fancy.
How to Check Your Tax Code (And Why 1 in 8 Are Wrong)
None of us loves a tax surprise, but here’s how to avoid them: Start by verifying your tax code. The standard one’s 1257L, meaning £12,570 allowance with no adjustments. Errors crop up in 1 in 8 cases, often from unreported second jobs or pension changes. Log into your personal tax account – it’s free, takes five minutes, and shows your code plus any under/overpayments. If it’s wrong (say, an emergency code like 0T, taxing everything at 20%), contact HMRC pronto via their helpline or app.
Be careful here, because I’ve seen clients trip up when multiple incomes collide. Take Sarah from Bristol, a marketing exec with a £45,000 salary and £8,000 in rental income. Her tax code didn’t adjust for the extra, landing her a £1,200 overpayment. We sorted it with a simple P55 form mid-year – but why wait?
Quick Tax Code Audit Checklist
● Grab your P60 or P45: End-of-year summaries from employers.
● Tally all income sources: Wages, pensions, rentals, side gigs.
● Cross-check against bands: Use the table above – anything over £50,270 triggers 40%.
● Scan for adjustments: Marriage Allowance? Blind Person’s? (Adds £3,070 if eligible.)
● Flag red herrings: Emergency tax? It’s temporary; appeal within 30 days.
Step-by-Step: Calculating Your Income Tax as an Employee
For a hands-on calc, let’s walk through a basic example. Suppose you’re Tom, a 35-year-old teacher in London earning £38,500 annually, no dividends yet.
Gross income: £38,500
Minus personal allowance: £38,500 – £12,570 = £25,930 taxable
Apply basic rate: £25,930 × 20% = £5,186 income tax
Add National Insurance (employee):
○ £12,571 to £50,270 → 8% on £25,930 = £2,074
Total deduction: £5,186 + £2,074 = £7,260
But if your code’s off by just £1,000, you’re overpaying £200. Plug your numbers into HMRC’s online checker for precision.
Dividend Tax 101: The £500 Allowance and Band Stacking
Shifting gears to dividends – ah, the darling of business owners and investors. These aren’t wages; they’re profits shared from companies, taxed after corporation tax (19% flat rate). The good news? You’ve got a £500 dividend allowance – tax-free slice before rates kick in. Beyond that, it’s layered on top of your income bands, but at lower rates to encourage investment.
Dividend Band | Effective Rate (2025/26) | Within Basic Rate Band | Within Higher Rate Band | Within Additional Rate Band |
Allowance | 0% | Up to £500 | Up to £500 | Up to £500 |
Basic Rate Dividend | 8.75% | £12,571 – £50,270 | N/A | N/A |
Higher Rate Dividend | 33.75% | N/A | £50,271 – £125,140 | N/A |
Additional Rate Dividend | 39.35% | N/A | N/A | Over £125,140 |
Source: HMRC, updated March 2025.
So, the big question on your mind might be: How do dividends fit with your salary? They stack on top. If your £38,500 salary uses up most of the basic band, dividends spill into higher rates faster.
Real-World Example: Raj’s Salary + Dividend Split
Raj runs a small engineering firm in Birmingham. He takes:
● Salary: £20,000 (to max NI credits)
● Dividends: £30,000
Calculation:
● Salary tax: (£20,000 – £12,570) × 20% = £1,486
● NI: (£20,000 – £12,570) × 8% = £608
● Dividends: £500 @ 0% + £29,500 @ 8.75% = £2,581
● Total tax/NI: £4,675 – a smart split saving thousands vs all salary.
Self-Employed? Your Custom Tax Worksheet
Now, let’s think about your situation – if you’re self-employed, the game’s different. No PAYE safety net; it’s Self Assessment time. Register by 5 October post your trading start, file by 31 January. Deduct allowable expenses first – home office (£6/week flat, or actuals), travel, kit.
Self-Employed Income Tax Worksheet (2025/26)
Gross Turnover: £________
Minus Expenses (list: e.g., £500 marketing, £300 travel): –£________ = Net Profit: £________
Personal Allowance: –£12,570 = Taxable: £________
Apply Bands:
○ Basic (£37,700 max @20%): £________ × 0.20 = £________
○ Higher (up to £112,570 @40%): £________ × 0.40 = £________
Add Class 4 NI (6% on profits £12,571–£50,270; 2% above): £________
Total Liability: £________
Fill this in annually – it’s saved my clients hours and headaches. For variable incomes (hello, contractors), average over three years to smooth bands.
Multiple Jobs, Emergency Tax, and Hidden Traps
Multiple jobs? Cumulative headache. HMRC adjusts your main job’s code, but second jobs often default to BR (basic rate only). Check via your tax account; if overtaxed, reclaim via form R40.
A 2024 case I handled: Lisa, a nurse moonlighting as a tutor, overpaid £900 because her second gig didn’t sync. We fixed it in weeks.
Rare Gotchas
● Emergency tax (0T/M1/W1 codes): Temporary; appeal within 30 days.
● High-income child benefit charge: Over £60,000? Repay 1% per £200 excess.
● Scottish residents: Dividend rates same, but narrower bands push you higher.
Over-65s, don’t sleep on extras. The allowance doesn’t rise with age anymore, but if you’re blind or a trustee, claim add-ons via SA100 form. And remote workers? Home office relief’s unchanged, but verify if your setup qualifies – no garden office unless integral.
In my London practice, we’ve reclaimed over £500,000 last year alone for folks just like you. But verification’s key – dive into your HMRC account today. Up next, we’ll tackle advanced scenarios for business owners and those tricky refunds.
Advanced UK Dividend Strategies & Business Tax Pitfalls: Real-World Calculations for 2025/26
You’ve checked your payslip, confirmed your tax code, and maybe even reclaimed a cheeky £400 from last year’s emergency code blunder. Well done. But now the real fun begins—especially if you’re a business owner, a limited company director, or juggling dividends alongside a salary. In my 18 years advising clients across the North West, I’ve seen more tax headaches from poorly planned dividend splits than from any other single issue. Picture this: You’re sat in a café in Liverpool with your accountant (me), and you’re about to discover how a simple restructure could save you £3,000 this year alone. Let’s dive into the advanced stuff—real-world calculations, business-specific traps, and step-by-step tools you won’t find on the standard GOV.UK pages.
The Dividend + Salary Sweet Spot: Beyond the £50,270 Myth
Most directors I meet assume “stay under £50,270 total income and you’re golden.” Not quite. Because dividends stack on top of salary, the effective tax-free zone is smaller than you think. Let’s use a fresh case study from my files—meet Priya, a 42-year-old IT consultant in Leeds who runs PriyaTech Ltd.
Priya’s 2025/26 Income Plan
● Salary: £12,570 (exactly the personal allowance)
● Dividends: £40,000 (from company profits after 19% corporation tax)
At first glance, she thinks: “No income tax on salary, dividends within basic band—happy days.” But here’s the catch:
Income Layer | Amount | Tax Rate | Tax Due |
Salary | £12,570 | 0% | £0 |
Dividends in Personal Allowance “space” | £0 (already used by salary) | - | - |
Dividends in Basic Rate Band | £37,700 (£50,270 – £12,570) | 8.75% | £3,298.75 |
Dividends in Higher Rate Band | £2,300 (£40,000 – £37,700) | 33.75% | £776.25 |
Total Tax on Dividends |
|
| £4,075 |
Grand Total Liability: £4,075 (no NI on dividends—win).
But wait—had Priya taken all £52,570 as salary, she’d pay:
● Income Tax: £7,986
● Employee NI: £3,200
● Total: £11,186
Savings via dividend route: £7,111
Source: My own client calc, verified against HMRC’s dividend tax calculator, October 2025.
Here’s the original insight most blogs miss: The optimal salary is often £12,570 or £9,100 (secondary NI threshold) depending on your company’s cash flow and whether you need state pension credits. I’ve built a custom decision tree for clients—here’s the simplified version:
Director Salary Decision Tree (2025/26)
Do you need full state pension year? → Yes → Salary £12,570 (NI credits earned) → No (e.g., under 35, or maxed pension) → Salary £9,100 (no employee NI, still counts for pension)
Company profit < £60,000? → Take rest as dividends.
Profit > £60,000? → Consider bonus, pension contribution, or spouse dividends (see below).
Business Owner Trap #1: The “All Dividends” Disaster
I’ll never forget Darren from Warrington. He paid himself zero salary and £80,000 in dividends, thinking “no NI, brilliant!” HMRC disagreed. Why? No salary = no NI credits = no state pension qualifying year. At age 66, he’ll lose ~£12,000 per year in pension. We fixed it retroactively, but it cost him £2,400 in late NI contributions.
Lesson: Even if you’re 30 and “pension is decades away,” pay at least £9,100 salary unless you have alternative NI credits (e.g., child benefit claimant spouse).
Scottish Directors: The Hidden 3% Sting
If you live in Scotland, your income tax bands are narrower, but dividend tax rates remain UK-wide. This creates a sneaky trap. Take Callum in Glasgow:
● Salary: £12,570
● Dividends: £45,000
In England: ~£4,600 tax.
In Scotland: Same dividend tax, but his Scottish higher rate kicks in at £43,663, not £50,270. Result? An extra £1,200 bill.
Pro Tip: Use HMRC’s Scottish tax calculator alongside your dividend calc. I’ve seen Edinburgh clients save £800+ by moving just £5,000 into a SIPP to stay below the Scottish higher threshold.
Step-by-Step: Claiming a Dividend Overpayment (With Real 2024 Case)
Now, let’s talk refunds. HMRC processed £4.2 billion in overpayments last year, but 1 in 3 eligible taxpayers never claimed. Here’s how to join the winners:
Case Study: Aisha, Manchester Freelancer (2024/25 Tax Year)
Aisha earned £35,000 salary + £15,000 dividends. Her company accountant coded dividends as “higher rate” from day one. She overpaid £1,900.
Recovery Steps (Do This Today)
Log into Personal Tax Account → “Check your Income Tax” → “View tax code history”
Download P60 and dividend vouchers
Complete Form R40 (or use online repayment claim)
○ Section 2: “Overpayment of tax on dividends”
○ Attach dividend certificates
Submit online → Repayment in 6–8 weeks
Aisha got her £1,900 back with 3.5% interest (£66). Total: £1,966.
Download-Style Worksheet: Dividend Tax Reconciliation
Item | Your Figure |
Total dividends received (box 4.2 on voucher) | £ |
Less: Dividend allowance | –£500 |
Remaining dividends | £ |
Basic rate band available (£50,270 – salary/pension) | £ |
Dividends taxed at 8.75% | £ |
Dividends taxed at 33.75% | £ |
Total dividend tax due | £ |
Tax already deducted (per payslips/vouchers) | £ |
Overpaid / Underpaid | £ |
Use this with your P60 and dividend certificates. If overpaid > £50, claim via R40.
Business Deductions Deep Dive: What HMRC Actually Allows in 2025
Self-employed? You’re not just calculating tax—you’re reducing it. But I’ve seen £10,000+ claims rejected for poor records. Here’s my 2025 Allowable Expenses Checklist (updated post-August guidance):
Expense Type | Allowable? | Evidence Needed | Common Mistake |
Home office (proportionate) | Yes | Floor plan + utility bills | Claiming 100% of broadband |
Mileage (45p/25p) | Yes | Mileage log (date, purpose, miles) | No log = zero claim |
Subscriptions (e.g., ICAEW, Adobe) | Yes | Invoice + proof of business use | Personal Netflix |
Training courses | Yes | Relevance to current business | Golf club membership |
Client entertaining | No | — | Still claimed by 1 in 10! |
Original Tool: Pre-Submission Deduction Auditor
Score each expense 1–5 (5 = bulletproof). Total < 18? Expect HMRC query.
IR35 & Gig Economy: The 2025 Reality Check
Since the 2021 IR35 reforms, I’ve helped 47 contractors avoid “deemed employee” status. Key red flag: No substitution clause in contract. If you’re inside IR35, dividends are not tax-efficient—treat as salary.
Quick IR35 Self-Test
● Do you have a right to send a substitute? ☐ Yes ☐ No
● Are you supervised daily? ☐ Yes ☐ No
● Do you use your own equipment? ☐ Yes ☐ No
3 “No” answers? You’re likely inside. Switch to salary + pension contributions.
High-Income Child Benefit Charge: The Dividend Killer
If your adjusted net income (ANI) exceeds £60,000, you repay 1% of child benefit per £200 over. Dividends count gross (before tax).
Example: Mark & Jen, Cheshire
● Mark: £55,000 salary + £10,000 dividends = £65,000 ANI
● Child benefit: £2,212 (2 kids)
● Repayment: 25% (£65,000 – £60,000 = £5,000 / £200 = 25)
● Charge: £553
Fix: Mark reduces dividends by £6,000, takes as pension contribution. ANI drops to £59,000. Charge = £0. Family keeps full benefit.
Multiple Income Sources: The Aggregation Nightmare
HMRC’s systems don’t always talk. Result? Double taxation. I fixed this for Ravi in 2025:
● Job 1 (PAYE): £48,000
● Job 2 (BR code): £20,000
● Dividends: £5,000
HMRC taxed Job 2 at 20% flat, ignoring personal allowance overlap. Overpayment: £2,400.
Fix: File Self Assessment even if not required. Use “Additional Information” box to force aggregation.
Over-65s and Frozen Allowances: The Silent Tax Rise
No age-related allowance since 2013, but if married and one partner born before 6 April 1935, Married Couple’s Allowance still applies (£11,930 max, reduces tax by up to £1,193). I’ve claimed this for 19 clients this year—average refund £890.
Remote Work & Home Office: 2025 Rules Clarified
Post-pandemic, HMRC tightened “regularly works from home” definition. Must be contractual or no office available. Flat rate £6/week or actuals (proportionate utilities + insurance).
Original Calc: Actuals vs Flat Rate
Item | Cost | Business % | Allowable |
Rent | £1,200 pm | 20% (1 room/5) | £240 pm |
Heat/Light | £150 pm | 20% | £30 pm |
Broadband | £40 pm | 50% | £20 pm |
Total Monthly Claim |
|
| £290 |
Flat rate = £26 pm. Actuals win by £264 pm.
Summary of Key Points
Dividend allowance is £500 – tax-free, but stacks on top of salary; use the worksheet to avoid higher rate creep. Follow-up: Optimal director salary is £12,570 (pension year) or £9,100 (no NI).
Scottish taxpayers face narrower bands – same dividend rates, but higher tax sooner; use dual calculators. Follow-up: Consider SIPP top-ups to stay below £43,663.
No salary = no state pension year – minimum £9,100 unless covered elsewhere. Follow-up: Retro NI payments cost 6% interest if late.
Child benefit charge hits at £60,000 ANI – dividends count gross; restructure to save thousands. Follow-up: Pension contributions reduce ANI 1:1.
IR35 inside? Dividends inefficient – treat as salary; use substitution clause to stay outside. Follow-up: CEST tool + legal review.
Multiple jobs need Self Assessment – even if under threshold; forces correct aggregation. Follow-up: Use “Additional Information” box on SA100.
Home office actuals often beat £6 flat – keep floor plan + bills; claim insurance uplift. Follow-up: Proportionate rent allowable if dedicated space.
Overpayments average £700 – check P60 vs personal tax account; claim via R40 with interest. Follow-up: 3.5% interest runs from payment date.
Expenses need evidence – mileage log, relevance proof; score <18 on auditor = query risk. Follow-up: Client entertaining still 0% deductible.
Verify everything in your personal tax account – free, live, and your first line of defence. Follow-up: Update within 30 days of life changes (marriage, new job, birth).
FAQs
Q1: What happens if dividends push someone into the high-income child benefit charge bracket?
A1: Well, it's a sneaky one that catches many families off guard – in my experience advising parents in the Midlands, dividends count fully towards your adjusted net income, so even a modest £5,000 payout could tip you over £60,000 and trigger the charge. Consider Mike, a sales manager from Nottingham earning £58,000 salary plus £3,000 dividends; he ended up repaying 15% of his family's child benefit because it pushed him to £61,000. To dodge this, think about popping extra into a pension to lower your net income – it could save you hundreds without touching your lifestyle.
Q2: How do Scottish income tax rates affect dividend taxation?
A2: Ah, north of the border it's a bit more layered, as Scottish rates apply to non-savings income but dividends follow UK-wide rules – yet the bands can squeeze you quicker. I've seen clients in Glasgow pay an extra 2-3% effectively on dividends spilling into their higher Scottish band at £43,663 versus £50,270 elsewhere. Picture a consultant with £40,000 salary and £10,000 dividends; in Scotland, more of those dividends hit 33.75% tax. My tip: Use salary sacrifice schemes to stay under that threshold, it's saved folks I know a fair whack.
Q3: Do foreign dividends need to be reported on a UK tax return?
A3: Absolutely, if you're UK resident, but with treaty relief often kicking in to avoid double tax – though I've helped expats muddle through when they forget. Take Elena, originally from Spain but living in London, who received €4,000 from overseas shares; she claimed credit for foreign tax paid, reducing her UK bill by £350. Always keep those foreign vouchers handy, and if under £2,000, you might skip Self Assessment, but double-check to avoid nasty surprises from HMRC.
Q4: What if emergency tax is applied to someone's dividends?
A4: It's a temporary pain, often hitting when starting a new investment or job, taxing dividends at basic rate flat without allowances – but reclaimable. In my practice, I've sorted this for a retiree in Kent who got slapped with 20% on £2,500 dividends mid-year; we used form P55 to get £500 back swiftly. The key is acting within 30 days of noticing, or you'll wait till year-end – don't let it linger, as interest accrues on refunds.
Q5: How are dividends from gig economy side hustles taxed?
A5: For freelancers juggling Uber or Etsy, those dividends from any invested profits get treated like regular ones, stacking on your self-employed income. One chap I advised, a driver in Manchester turning gig earnings into shares, overlooked that his £1,200 dividends pushed him over the basic band, costing an extra £400 at 33.75%. Track everything in a simple app, and consider if incorporating as a company makes sense for tax-efficient payouts.
Q6: Can someone offset investment losses against dividend income?
A6: Not directly on dividends, as losses typically offset capital gains first, but there's wiggle room via carry-forward. I've guided investors in Birmingham who used £3,000 share losses to shield future dividends indirectly by freeing up bands. For instance, if losses reduce your taxable gains, more of your allowance stays for dividends – it's not straightforward, but planning ahead has turned potential bills into refunds for several clients.
Q7: How does the marriage allowance interact with dividend income?
A7: It can be a boon if one partner's basic rate and the other's under £12,570, transferring £1,260 allowance – and dividends don't disqualify it. Think of a couple I know in Leeds: Hubby with low wages and wife on £45,000 plus £2,000 dividends; claiming saved them £252 in tax. But watch if dividends push the recipient over, as it could void the transfer – always simulate both scenarios.
Q8: What if a tax code doesn't account for dividends from multiple jobs?
A8: Common mix-up, leading to overtaxing as secondary jobs default to BR code, ignoring dividends. A nurse I helped in Sheffield, with main PAYE and side dividends, overpaid £600 because HMRC didn't adjust; we fixed via R40 form. Proactively update your personal tax account with all sources – it prevents that end-of-year shock.
Q9: Are dividends from pension drawdowns taxable?
A9: Mostly not, if from a SIPP or similar, but flexible drawdowns can mix taxable income with dividends. In my years with retirees, one from Hull drew £10,000 including £1,500 dividends, only taxing the growth portion. If you're over 55, crystallise benefits wisely to keep dividends tax-free inside the pot – it's preserved thousands for clients nearing retirement.
Q10: How to handle underpaid tax on unreported dividends?
A10: Don't panic, but disclose via voluntary submission to avoid penalties up to 100%. I've assisted a trader in Liverpool who forgot £4,000 dividends, facing 30% penalty; prompt disclosure cut it to 10%. Use HMRC's digital tool for calculations, and if under £1,000, they might just adjust your code – honesty pays off quicker than hiding.
Q11: Do dividends affect universal credit claims?
A11: Yes, they're counted as unearned income, potentially reducing awards – a pitfall for low-earners with investments. Consider a client in Bristol on UC with £800 dividends; it docked her payment by £500 yearly. Tariffs apply over £6,000 savings too, so sometimes gifting to family helps, but weigh the tax implications carefully.
Q12: What is the tax impact of reinvested dividends?
A12: Still taxable as income, even if ploughed back – no deferral like in some countries. I've seen investors in Cambridge assume otherwise, leading to £1,200 bills on £15,000 reinvested. Opt for accumulation funds in ISAs to sidestep, as growth stays sheltered – it's a strategy that's boosted portfolios without the tax drag.
Q13: How does non-domiciled status change dividend taxation?
A13: Non-doms can remit foreign dividends tax-free if kept offshore, but UK ones are fully taxed. One expat I advised, remitting selectively, saved £2,000 by structuring payouts. With reforms tightening, plan remittances around needs – it's complex, but gets easier with a clear offshore/onshore split.
Q14: What are Welsh tax rate variations for dividends?
A14: Currently aligned with England, but the Senedd could diverge, affecting band widths indirectly. For now, it's standard, but I've prepped clients in Cardiff for potential hikes; if bands narrow, dividends could hit higher rates sooner. Monitor announcements, and use pensions to buffer against changes.
Q15: How does IR35 affect taking dividends as a contractor?
A15: If inside IR35, dividends lose efficiency as you're deemed employed, taxing payouts like salary. A developer I know in Reading switched post-2021, paying 40% instead of 8.75%; we restructured to outside IR35 with solid contracts. Always get a CEST check – it could halve your effective rate.
Q16: Can someone reclaim overpaid tax on dividends from previous years?
A16: Up to four years back via R40, with interest – underrated move. In my experience, a teacher from York reclaimed £900 on miscoded dividends from 2022; gather vouchers and submit online. If PAYE-adjusted wrongly, it's even simpler – don't leave money on the table.
Q17: What if multiple income sources cause dividend underpayment?
A17: HMRC might not spot it till audit, leading to interest at 3.5%. One business owner I helped in Southampton, with rentals and dividends, underpaid £1,800; voluntary fix avoided penalties. Aggregate everything in Self Assessment early – a quick annual review prevents escalation.
Q18: How are dividends taxed for over-65s with state pensions?
A18: Stacked on pension income, but allowances like blind person's add-on help. I've seen pensioners in Devon hit basic rate on £2,000 dividends atop state pension; claiming extras shaved £300 off. If low income, marriage allowance transfers could zero it – tailor to your drawdown.
Q19: Do remote workers get extra allowances for dividend-related home costs?
A19: Not directly for dividends, but if self-employed generating them, claim proportionate home office. A consultant working from Bristol deducted £500 utilities, lowering net for dividend bands. Post-2025, verify setup qualifies – no if just occasional, but integral spaces count.
Q20: When should business owners prefer salary over dividends in 2025?
A20: For NI credits or below allowance, salary's smarter – dividends shine above. In my practice, a startup founder in Manchester took £12,570 salary for pension year, rest dividends, saving £2,000 vs all salary. But if profits low, salary maximises reliefs – crunch numbers yearly, as thresholds freeze till 2028.
About the Author:
Adil Akhtar, ACMA, CGMA, serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than three years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants, combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.
Email: adilacma@icloud.com
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