Retained profit planner
See whether drawing all your dividends now, or spreading them across two tax years, saves you tax.
Draw now vs spread across years
Change the numbers, the results update instantly.
Assumes no other income in either year and that spreading is actually available (retained profit, no urgent need). Always take advice before acting.
How it works
Dividends stack on top of your other income and are taxed more heavily once they push you into a higher band. Drawing all your profit as dividends in one year can tip a large chunk into the higher or additional rate, whereas spreading the same total across two tax years, drawing up to the basic rate band each year, keeps more of it at the lower dividend rate. This only helps if you can afford to wait for part of the money and expect your income need to allow it. It's the kind of year-end timing decision we work through with clients as part of our limited company accounts service.
Frequently asked questions
Why does spreading dividends save tax?
Because each tax year gets its own personal allowance, dividend allowance and basic rate band. Splitting a large dividend across two years means more of it is taxed at the lower basic rate instead of stacking into higher bands in one go.
Is this always the right approach?
No, it depends on whether you actually need the money now, your expectations for next year's income, and any changes to rates or your circumstances. It's a planning option, not a rule.
Does retained profit in the company carry any risk?
Retained profit stays as a company asset, subject to business risk, until it's drawn out. It can also affect Business Asset Disposal Relief calculations if you later sell the company.
Can I combine this with pension contributions?
Yes, pension contributions and dividend timing are often planned together to manage which tax band your income falls into each year, an approach covered in our tax-efficient salary guide.
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These results are a simplified illustration based on 2026/27 rates, not advice. Your real position depends on your full circumstances. For a personalised answer, book a free consultation.
Numbers looking complicated?
A calculator gives you an estimate. A free call gives you a plan. Book one and we'll work through your actual situation.