Dividend tax - things I didnt realise

[Hobosapien]

Not sure about the grossing. I thought the dividend tax credit thing was just an accounting method so no further tax was due following it being covered with corp tax.

So net not gross dividend amount was used for personal accounting purposes when working out how much income has been received in a year, and how it affects the personal allowance.

I rely on my accountant to advise what the max divi will be at year end without going into the higher tax bracket. It's always a round figure, which may have more reason behind it than it being the nearest round figure to the threshold.

[TheCyclingProgrammer]

So net not gross dividend amount was used for personal accounting purposes when working out how much income has been received in a year, and how it affects the personal allowance.

I'd imagine (hope) your accountant has got this right but if that was your understanding you might want to double check your figures. You always used the gross amount when calculating your personal income.

[psychocandy]

Correct. Even though you'll be paying more tax than before, if you are taking the optimum salary and dividends up to the higher rate threshold then strictly speaking your overall take-home will increase (in other words instead of feeling the effect of the dividend tax in your own pocket, it will impact your company profits instead).

Ah but only if you go pretty much right up to the tax bracket? Because of what I said....?

[GB9]

I thought the 5k divi was part of your 11k.

[LondonManc]

You can take my life but you'll never take my Valleeeeeeyyyyyyyssss!

BTW - you do know that the valleys is only part of south wales don't you? The cities, for instance, are most definitely NOT in the valleys.

Oh I do, yes. Thanks.

Family ties with Barry Dock from over a century ago until they moved into one of the valleys

[missinggreenfields]

I thought the 5k divi was part of your 11k.

No, it's separate.

You can use the InTouch calculator here.

[psychocandy]

Oh I do, yes. Thanks.

Family ties with Barry Dock from over a century ago until they moved into one of the valleys

Barry is most definitely the "Flatlands"

[TheCyclingProgrammer]

Ah but only if you go pretty much right up to the tax bracket? Because of what I said....?

Yes, you'd still need to go right up to the threshold.

You're already paying 7.5% tax once you've gone over the £5k allowance (over and above the personal tax allowance) so I can't see any good reason not to go right up to the higher tax threshold unless you don't have the available profits.

Using the optimum salary my accountant has given me this year of £670/month (£8040 a year, a slight increase over last year), gross dividends of £34,960, gross income is £43000 and total tax is £2025, so take-home of £40,975.

Last year salary was £7,752, maximum net dividend (before grossing up) would be £31,169 with no additional tax. Total take-home of £38,921.

So I'll be £2k better off this year personally but its cost MyCo an extra £3.7k in profit. £2k of that is as a result of the dividend tax which is unavoidable anyway, the rest is just more money in my pocket instead of the company which is fine by me (and as my wife is a 25% shareholder her overall dividend goes up too meaning a bit more in our pockets).

[psychocandy]

Yes, you'd still need to go right up to the threshold.

You're already paying 7.5% tax once you've gone over the £5k allowance (over and above the personal tax allowance) so I can't see any good reason not to go right up to the higher tax threshold unless you don't have the available profits.

Using the optimum salary my accountant has given me this year of £670/month (£8040 a year, a slight increase over last year), gross dividends of £34,960, gross income is £43000 and total tax is £2025, so take-home of £40,975.

Last year salary was £7,752, maximum net dividend (before grossing up) would be £31,169 with no additional tax. Total take-home of £38,921.

So I'll be £2k better off this year personally but its cost MyCo an extra £3.7k in profit. £2k of that is as a result of the dividend tax which is unavoidable anyway, the rest is just more money in my pocket instead of the company which is fine by me (and as my wife is a 25% shareholder her overall dividend goes up too meaning a bit more in our pockets).

I split divs with mrs 50/50. I'll have to check divs for last year and try and work out the difference for me. Last year my salary was 11k if I remember, this year £8060.

[Hobosapien]

I'd imagine (hope) your accountant has got this right but if that was your understanding you might want to double check your figures. You always used the gross amount when calculating your personal income.

That's why I don't rely on my understanding but let them tell me what divi I can draw based on year end accounts they're preparing, and income I've received during the tax year the divi is declared within.

Let them earn their fees.