Hi Simon
I have been playing with the numbers based on £75k per annum and I'm obviously some way off with my numbers...am I missing something very obvious? Workings as follows for one year only:
Earnings: £75k
Salary: £4.8k
Profit: £70.2k (£75k - £4.8k)
19% Small Business Tax: £13.3k
Gross Dividend: £56.9k (Profit minus small business tax)
Taxable Dividend: £23.6k (Gross Dividend minus lower tax threshold of £38.1k)
22.5% Dividend Tax: £5.3k
Net Dividend: £51.6k (Gross Dividend minus Dividend Tax)
Net Earnings: £56.5k per annum (Net Dividend plus + Salary)
Where have I gone wrong? The only thing I can think of is that I've done the Dividend wrong, my understanding is as follows:
First £4,800 (i.e. Salary) is a completely tax free. The next £33,300 if paid as a dividend is subject to 10% tax liability but then the 10% tax credit balances that out, so again, tax free in reality. Anything above that amount (i.e. £38.1k) is subject to a 32.5% tax liability but the 10% tax credit reduces that down to 22.5%...Have I got this right?
Can't wait for the 100 posts that are about to blast the Newboy for missing something an 8 year old would spot!!
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