THIS ARTICLE NEEDS TO BE UPDATED FOR THE NEW NIC THRESHOLDS ETC
Compared to 2021/22, the personal allowance threshold will not change and will stay at £12,570 per year and the higher rate tax will also still start at £50,270.
From 6 April 2022 the dividend tax rates will all increase by 1.25% :
First £2,000 of dividends: no tax due to dividend allowance
Dividends at basic rate (total income below £50,270): 8.75%
Dividends for total income above £50,270 and below £150,000: 33.25%
Dividends where total income is above £150,000: 39.35%
Many of our clients prefer to keep cash in their company until they need it and to avoid higher rate of income tax. In this case, from April 2022 onwards we would recommend a salary of £9,100 (it is £8,840 for 2021/22) and dividends of £41,170.
So for a company owner with total income of £50,270, their income tax for 2022/22 will be £2,945:
|Personal allowance left after salary £9,100||£3,470||£0|
|Basic rate dividends subject to dividends allowance||£2,000||£0|
|Basic rate dividends taxed at 8.25%||£35,700||£2,945|
|Total for dividends||£41,170||£2,945|
|Total income and tax||£50,270||£2,945|
If a director/owner takes dividends above this level, they will need to pay tax at 33.25% on the excess dividends above total income of £50,270 and 39.35% for excess dividends above total income of £150,000.