I'm new to running a limited company and I have made the mistake of paying myself and the other 50% shareholder solely in dividends - £15,000 since our incorporation on 03/02/2015. I should note that we're a new start-up and neither director has any other sources of income.
I'm now discovering that even though the business earns very little, (we've only received £7,500 each, up to year end 29 Feb 2016), that we have to pay quite a lot of tax as dividends are from profits subject to cooperation tax. Better would have been to have a salary it seems, since we have no other incomes (please correct me if I'm wrong).
What I'd like to know is, is there any way we can turn these dividends into salary by paying the appropriate NIC's on them? I've been told I can do it with dividends paid after 01 March 2016 up until now. But the real stinger for us is the amount due to be paid soon (3rd Nov) due to the 15,000 paid out in dividends from 03/02/2015 (incorporation) to year end 29 Feb 2016.
Any advice would be much appreciated. It's a big hit for us to pay tax that could have been avoided when our incomes are currently so low.