As a director of a limited company, you can take money from the company in three ways:
- Salary, expenses and benefits
- Directors loans.
A new dividend regime came into effect from April 2016 in the UK. Under the new regime, everyone will be entitled to a dividend allowance which means the first £2,000 of taxable dividends will be taxed at 0%.
Any dividends in excess of this will be taxable at new rates.
|Tax band||Tax rate|
Dividends are not allowable expenses and so the company does not get relief on them.
Certain expenses are allowable to the business such as salaries paid to the directors and benefits paid by the company to the director but there will be tax issues and national insurance considerations here.
- Entertaining employees/directors at annual functions (rules apply)
- Payments into directors’ pensions
- Mobile phone (rules apply)
The following benefits also apply.