Director take-home

You know what you are paying yourself. This shows what actually reaches your bank account once income tax, dividend tax and National Insurance have come out, for the year and for the month.

What you take

Gross, before any deductions.
The cash amount declared, not the pre-tax profit.
Rent, a pension, another employment.

The full breakdown

Which band your dividends fall in

Salary and other income are taxed first. Dividends sit on top, so they are taxed at whatever band is left.

What happens to your gross income

Take-home Income tax on salary and other income Dividend tax Employee National Insurance

Why your dividend tax bill can jump

Dividends are treated as the top slice of your income. Your salary and any other income use up the personal allowance and the basic rate band first, and the dividends are then taxed on whatever band is left. So the same dividend can be taxed at three different rates in the same year.

There is a second step at £100,000. Above that the personal allowance is cut by £1 for every £2 of income, which pushes the effective rate on that slice well above the headline rate until the allowance has gone completely at £125,140.

The dividend tax is not deducted at source. It comes out through your self assessment return, usually on 31 January after the end of the tax year, with payments on account on top if the bill is large enough. Setting the money aside as you go is the part people most often get wrong.