When it comes to income tax, dividends generally benefit from lower rates compared to salaries across all tax brackets. Here’s a breakdown:
Salary: No income tax on earnings up to £12,570.
Dividends: No income tax on dividends up to £13,070 (including the £12,570 personal allowance and £500 dividend allowance).n earnings up to £12,570.
Tax Rates:
Basic Rate
Salary: 20% (on £12,570 to £50,270)
Dividends: 8.75% (on £13,070 to £50,270)
Higher Rate
Salary: 40% (on £50,271 to £125,140)
Dividends: 33.75% (on £50,271 to £150,000)
Additional Rate
Salary: 45% (on £125,141 and above)
Dividends: 39.35% (on £150,001 and above)
Understanding these differences can help you make informed decisions about how you structure your income.
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