I have received a the following explanation from Giant with regards to their calculation of self assessment dividend tax amounts which they use in their salary illustration for a managed ltd co.
(I did not agree with the calculated values and asked how they calculated them)
Quote Giant:
"Giant deduct 19% (basic/small companies rate) corporation tax from your dividend payments at source".
and
"Giant deduct 19% (basic/small companies rate) corporation tax at source. However, as a high rate tax payer you are required to pay 32.5% corporation tax on those dividends earned over the high rate tax threshold. Therefore, you will be required to pay an additional 13.5% corporation tax at self assessment on those dividends".
This suggests they did 32.5-19 = 13.5%
From my search in this forum so far I thought I understood that CT of 19% is deducted off company profit (income - expenses).
Dividends are paid off post-CT profits. Shareholders receiving dividends receive a 10% tax credit with the dividends and with 10% dividend tax for low tax band tax payers they have effectively no tax to pay on the received dividends.
If however the dividends take the recipient into higher tax band then on the difference between high tax band threshold and total gross income, dividend tax of 32.5% should be paid. Taking into accound the 10% tax credit this effectively reduces to 22.5% dividend tax off the GROSS dividend or equivalently 25% off the NET dividends, i.e. the amount that got paid out.
I find it had to believe that Giant would give wrong advidce on this matter so where did I get things wrong?
(I did not agree with the calculated values and asked how they calculated them)
Quote Giant:
"Giant deduct 19% (basic/small companies rate) corporation tax from your dividend payments at source".
and
"Giant deduct 19% (basic/small companies rate) corporation tax at source. However, as a high rate tax payer you are required to pay 32.5% corporation tax on those dividends earned over the high rate tax threshold. Therefore, you will be required to pay an additional 13.5% corporation tax at self assessment on those dividends".
This suggests they did 32.5-19 = 13.5%
From my search in this forum so far I thought I understood that CT of 19% is deducted off company profit (income - expenses).
Dividends are paid off post-CT profits. Shareholders receiving dividends receive a 10% tax credit with the dividends and with 10% dividend tax for low tax band tax payers they have effectively no tax to pay on the received dividends.
If however the dividends take the recipient into higher tax band then on the difference between high tax band threshold and total gross income, dividend tax of 32.5% should be paid. Taking into accound the 10% tax credit this effectively reduces to 22.5% dividend tax off the GROSS dividend or equivalently 25% off the NET dividends, i.e. the amount that got paid out.
I find it had to believe that Giant would give wrong advidce on this matter so where did I get things wrong?
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