Maximise Tax Efficiency for Business Owners with Salary and Dividends

Accountants, when they're speaking to business owners, will always suggest to use the most tax-efficient method of accounting and managing your money as they possibly can do. So what this means is in the UK we have something called the lower earnings threshold, which is around about £12,500 a year. So you can pay yourself as a salary as a business owner £1,000 a month and you won't have to pay any tax. You might have to make some small amount of National Insurance contributions. It's like, you know, a few hundred pounds at the end of the tax year. That's a very tax-efficient way way of doing it. And then the idea is that if you then make a profit over and above that initial £12,500 that you've paid yourself, you can then pay yourself in dividends. Now, it used to be years ago when I first started my business, there were all sorts of benefits for, for small business owners in terms of— years ago, £10,000 dividend allowance. So you could pay yourself £10,000 worth of dividends without having to pay any tax, which was brilliant.