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Changes
 for Directors 
from 
6 April 2023 
 

The recent Budget 
 announces significant changes to
how Directors Extract earnings...

The first significant changes for quite some time for Directors start from 6th April 2023 and into the next couple of tax years. 

In history, Directors were not taxed personally on Dividends, at all,  and the Company,  would only pay Dividend Tax. 

Then a rate of £5,000 personal tax free Dividend was announced  for the introduction of the 2016-2017 Tax Year. 
Thus at 6th April 2016..

This then meant that all Dividends you took , above the first £5,000 of Dividends, providing you stayed within the Basic Rate Tax Banding, were taxed at 7.5%. 

From  6th April 2018   this  personal tax free amount of Dividend had reduced down to £2,000,  so for the last few years, if you were an Owner Managed Business, and you ran the Company yourself as a Director, or with a couple of other Directors
the combined taxation would equate to 

-19% on all Dividends in the Company,  and 
-7.5% personally for all Dividends
- above the first £2,000. 

This meant a combined taxation of  
26.5% as opposed v.
Sole Trader taxation of 
20% (Tax) and 9% (National Insurance) - 
in the main.

From 6th April 2023 the Personal Tax Free Dividend for Directors reduces to £1,000

From 6th April 2024  the Personal Tax Free Dividend for Directors reduces to £500  only. 

Dividend Tax Rate increase Since 6 April 2022

Furthermore,  the rate on a Personal Self Assessment Tax Return for a Director, for Dividends have now gone up : 

The first time this will impact Directors   

is on the Personal Tax Return to year ending 5th April 2023  - ultimate filing deadline being 31st January 2024  for filing thereof and payment of the tax. 

Always better to do it in the Summer so you know well in advance of what is ahead to pay.   

For Higher Rate taxpayer  if you should be unfortunate enough in your Tax and Dividend planning,  to fall over into that higher rate banding,  it has risen too. A Tax planning tool you could use,  to keep out of the Higher Rate Dividend tax bracket is to send some of your Earnings to Pensions. 

This has a two fold effect. It will reduces the Profits chargeable to tax, and thus, the  amount of Company Tax at 19%,  and with good planning, can also keep you away from Higher Rate Tax banding too, keeping you in the Basic Rate banding. 


If you are a Director, or perhaps there are a couple of Directors in your Company, and you would like a no obligation chat about all the changes taking place, this year, and the next two years;     simply  email us at This email address is being protected from spambots. You need JavaScript enabled to view it.,  pop in for a chat at our offices at Regus, Park House, Rubery or give us a call on 0121 270 4072.  You can also talk to us on the Discord app by Appointment.  

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