1. Dividends – The Annual Dividend Allowance (£5,000 Tax-Free)
The current personal tax-free dividend allowance is £5,000. If you have not drawn this much from your business then at the very minimum you should consider distributing this amount out to each shareholder.
If for cash-flow reasons, your business cannot afford to have £5,000 withdrawn per shareholder, then you can always pay out a dividend and then redeposit it back into the business as a director’s loan.
This way you will have crystallized the tax-free allowance from this tax year and will be able to draw the money back again, tax-free, at a future date whenever your cash-flow allows it.
Please note, dividends can only be paid out if your business has profits that it can distribute.
