For some time, company directors have been able to make a tax-efficient living by taking a combination of salary and dividends due to the generous Dividend Allowance.
However, changes which took effect in the new tax year have cut the allowance from £5,000 to just £2,000.
The changes, which came into force from 6 April 2018, are meant to level the playing field between the self-employed, directors, shareholders and employees, but if you’re not careful, you and your clients could get left behind.
In real terms, the cut will cost directors anywhere from £225 to £1,143 a year, depending on which tax bracket they fall into.
This could become complicated if you receive income from multiple sources, for example, shares and savings.
Now could therefore be a good time to review how you drawdown income from your company to avoid losing out.