2017/18 Dividend Payment Examples – Income Under £100k

April 11th, 2017

Table 4.1 Salary Only

£

Salary + Dividend

£

Gross profit 112,673.37 121,541.78
Employer NICs  (12,673.37) Nil
Salary 100,000.00  8,164.00
Corporation tax Nil (21,541.78)
Dividend Nil 91,836.00
Gross income 100,000.00 100,000.00
Dividend allowance   (5,000)
Personal allowance (11,500) (11,500)
Taxable income   88,500   83,500
Employee NICs  (5,520.32)     Nil
Income tax  (28,700.00) (20,012.50)
Net income 65,779.68  79,987.50

 

Again, the dividend route absorbs more (£8,868.41) gross profit, which boosts the resulting net income (by £14,207.82). The increase is proportionately less than in the £50,000 example above because the extra £50,000 all suffers 32.5% dividend tax, after 19% corporation tax (an effective marginal rate of 45.33%). This compares with £50,000 of salary where the corresponding rate, thanks to 2% employee NIC, is only slightly more at 49.03%. In additional rate tax territory, the corresponding marginal rates are 49.86% for dividend and 53.43% for salary.