Avoiding loss of personal allowance >£100k with dividends

[MoneyQe]

I am a bit confused by how dividends interact with the removal of personal allowance at £100k.

Example:
If I pay myself £200k PAYE = £117,768 after tax

If I pay myself £100k salary and £100k dividends = £125,756 after tax

Is this correct, or is there an adjustment to reflect that I should lose my personal allowance >£100k?

Or, by paying via dividend, can I avoid this? Is there something else I am missing?

you lose your tax free allowance if your adjusted net income goes over 100k and adjusted net income includes dividends so you’d still lose your allowance whichever way you paid yourself.

www.gov.uk/guidance/adjusted-net-income#what-is-adjusted-net-income

Assuming it is your personal company if you can control how you are remunerated, you also have to consider the impact on corporation tax.

@Icanttakethisanymore got it.

So I need to set my tax code as 0T regardless of how I approach it.

Thanks!

Your ANI doesn’t include money paid into a pension so if you earn 150k and pay 50k into a pension you don’t lose your allowance. That’s the only way round it really.

This calculator allows you to input salary and dividends -

https://gorillaaccounting.com/salary-dividend-tax-calculator/

Yes although I’m not sure how it would work if you take a directors loan…(assuming it’s your Ltd company)

You could ultimately unwind the loan by closing the company and paying CGT with entrepreneurs relief (assuming you met the criteria). I think there is tax on the directors loan but I think you get that back ultimately. Could be worth exploring.

@Icanttakethisanymore yes I’d looked at one of those calculators but it didn’t give a breakdown including that, I should have rebuilt it in a spreadsheet really.

I’d wondered if it was another one of HMRC’s charming ‘quirks’ they have littered the tax system with.

Just trying to make sure I don’t end up with a surprise tax bill really.

I’m a shareholder in a company. Thank you for your advice.

What do you do for a living?

Asking for a friend 👀..........

Paying it as wage you’d getcorporation tax relief, paying the same as dividend wouldn’t so your simple comparison between wages and dividends of the same amount is flawed.

@taxguru why would there be any benefit in paying it as a dividend then vs salary + employers NI etc?

Given - already paying at highest rate?