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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have recently started a limited company for part-time freelance

Resolved Question:

I have recently started a limited company for part-time freelance work. I already use up my personal tax allowance through my full time job, and just get into the higher rate tax band, therefore all additional income will be at the higher rate.
What is the most tax efficient way to pay myself from my limited company? PAYE, dividends, or other? This will amount to no more than £3000 per annum.
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.


If you are already drawing a salary from your full time job, then the most efficient way to draw a further £3,000 from your limited company would be in the form of dividends as opposed to salary.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


Customer: replied 3 years ago.

Thanks for the quick response. Am I right in thinking that if I pay myself through dividends, the company will not have to pay NI contributions? Do dividends count as an expense for corporation tax purposes?

Expert:  taxadvisor.uk replied 3 years ago.
Bob, thank you for your prompt reply.

You are right in your thinking that dividends do not attract NI contributions, employee or employer.

Dividends are distribution of taxed profits and not an expense of the company for CT purposes.

Provided your total gross income remains within basic rate tax threshold (£41,865), there is no taxation on dividends paid to you.

I hope this is helpful and answers your question.
taxadvisor.uk and 2 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes