Q: Am I right in thinking that it is always more tax efficient to be paid dividends rather than a salary?
A: It has long been the accepted wisdom that it is more tax-efficient for company owners to pay themselves a dividend rather than a salary but this simple rule of thumb is no longer always true.
The calculations are complex because you need to assess the overall tax cost to the business and the individual, taking into account corporation tax, income tax and national insurance.
Income tax rates on dividends increased by 1.25 per cent across all tax bands from April 2022 and a 25 per cent “main rate” of corporation tax will apply from April 1. The combined impact is that the overall