I was wondering if anyone who had set up a UK limited company may be able to help me with my question. I was looking into setting up a company recently. It seems that for a small company that has profits of Â£300,000 or less the tax is 20%. However, once you take withdrawals via dividends you are subject to tax. This seems ok if you are a low rate tax payer as the 10% tax credit you get offsets the 10% tax rate so you pay overall no more than the corporate tax rate. On the other hand, if you are a higher rate tax payer you are subject to a 33% tax, which after the 10% tax credit, is taken into account, leaves you liable to paying 23% on the dividend you receive. So, if you are a higher rate tax payer your total tax would be 43% (20% corporate and 23% on the dividend), which is higher than the current CGT rate of 40% especially since you are getting Â£9k free with CGT that isn't taxed. I feel I must be missing something here. If you are a higher rate tax payer do I really pay more if I set up a company?? Or have I got it wrong and dividends aren't taxed??