Can I earn around £43,000, and be in the "basic" tax bracket?

Management Consultant Asks:

I think in Scotland I can earn c.£43k and be in the 'basic' bracket? but If I do not draw a salary but instead class all of my drawdown as dividends (lets say I withdraw from the business £6k a month gross so an annual drawdown of £72k), I would pay 8.75% on the first c.£43k then 33.75% on anything above that value?


Acumenica Answers:

Dividends are subject to taxation based on UK tax thresholds, not Scottish income tax brackets.

Therefore, if your total personal income does not exceed £50,270 for the year, you can earn up to around £43k and your dividends will be taxed at the basic rate of 8.75%. It's important to note that dividends do not decrease corporation tax or contribute to your qualifying years for the state pension. However, drawing a modest salary from your company, alongside dividends, can achieve both of these outcomes. If you have additional income from sources outside your company, this approach may not be the most tax-efficient. Consulting with your account manager about the most tax-efficient combination of salary and dividends for your specific situation is advisable.