Page 14 - Budget Newsletter 2021

Make Mine a Dividend

A director/shareholder has £25,000 of gross profits in his company which he wishes to draw, either as
bonus or dividend in 2022/23. Assuming:
• the company pays corporation tax at the rate of 19%;
• the director is not resident in Scotland;
• and they already have annual income in excess of £50,270

the choice can be summarised thus:
Bonus Dividend
£ £
Higher rate Additional Higher Additional
rate rate rate
Marginal gross profit 25,000 25,000 25,000 25,000
Corporation tax @ 19% N/A N/A (4,750) (4,750)
Dividend N/A N/A 20,250 20,250
Employer’s NICs
Contributions £21,730 @ 15.05%^ (3,270) (3,270) N/A N/A
Gross bonus 21,730 21,968 N/A N/A
Director’s NICs £21,730 @ 3.25% (706) (706) N/A N/A
Income tax * (8,692) (9,779) (6,834) (7,968)
Net benefit to director 12,332 11,245 13,416 12,282
^ The Employment Allowance is assumed to be used or unavailable.
*Tax on all dividends at 33.75% for higher rate taxpayer and 39.35% for additional rate taxpayer as the
dividend allowance is assumed to be fully utilised elsewhere.

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