How to take advantage of Alphabet Shares?

Are you and your spouse paying too much tax as directors?

Did you know there is an option for your total dividend tax to be lower?

This is where alphabet shares come in.

What are alphabet shares you might ask?

In simple terms:

It's when Instead of all shareholders owning identical ordinary shares, a company creates multiple classes:

• A Shares

• B Shares

• C Shares

Each class can have different rights, such as:

• Dividend rights (most important use)

• Voting rights

• Rights to capital on liquidation

This is how you can flexibly pay dividends

Example:

• Spouse A (higher-rate taxpayer) → no dividend

• Spouse B (lower-rate taxpayer) → dividend paid

Another usage of having an alphabet share structure is if you’re in a position bringing in family members into the business for succession planning

How you can set one up?

When forming the company (via Companies House):

• Define multiple share classes in the Articles of Association

• Allocate shares (A, B, etc.) to shareholders from the start

if your company is already incorporated all you need to do is amend your article of association.

It's important that you communicate with a qualified accountant or tax advisor to ensure this is done correctly,