If you operate your business through a personal or family company and extract profits in the form of dividends, it is prudent to review your dividend policy to determine whether it would be beneficial to pay a further dividend before the end of the 2021/22 tax year on 5 April 2022. It should be remembered, however, that dividends can only be paid if you have sufficient retained profits, and where shares of the particular class in respect of which a dividend is being declared

Are you a company director or shareholder? Do you know how your dividends are taxed? What about the impact of the new health and social care plan? Understanding how dividends are taxed Dividends have their own tax rules and their own rates of tax. The rules and the rates apply in the same way regardless of whether the dividends are paid from your personal or family company as part of a profit extraction strategy, or whether they represent investment income on shares. As par

For personal and family companies, a tax efficient strategy for extracting profits is to take a small salary and to extract any further funds needed outside the company in the form of dividends (see https://www.janesaccounting.co.uk/post/tax-optimal-salary-for-2021-22). However, while there are no restrictions on taking a salary if the company is making a loss, the same is not true of dividends. Do you have retained profits? Dividends can only be paid out of retained profits

What should you do if your business doesn’t have enough profits to pay a #Dividend? There are several options available... If you operate through a limited company, for example as a personal or family company, you will need to extract funds from your company in order to use them to meet your personal bills. There are various ways of doing this. However, a popular and tax efficient strategy is to take a small salary which is at least equal to the lower earnings limit (set at £