calculating tax due on divi payments

[pickle]

OK, this should be easy. Why isnt it?

Given that I pay myself 5000 a year salary, how much of a dividend check can I write myself without being subjected to any additional tax via my end of year return (given that the company has already paid corp tax at 19%)

And how do you calcualte that amount? And then, for every 1000 pounds above this amount I pay myself as a divi, how much will I have to give to the tax man in my end of year return?

The reason Im asking is that I have 10k going into a VCT this year, which will mean I can claim 2k of tax relief through my end of year return. So I'd like to pay enough divi to make use of the 2k allowance.

Im sure this is really much simpler than I am making it. Im sure if someone could show me the calculations it would all become clear.....

[4Contractors]

Pickle

Tax on dividends as declared on your self assessment form is at 10%. All you need to do is calculate how much gross dividend you can pay yourself ie. allowance up to high rate personal tax less gross salary, less bank and b/s interest, less any other income (gross). This remaining figure then needs to be multiplied by 0.9 to provide you with the net dividend figure the company can pay you to avoid paying high rate tax.

[pickle]

OK, so (36145-5000) * 0.9 = £28030.50p divi check I can take without paying any extra tax.

All good so far. So say I write a check for £1000 over this amount (29030.50), I will be due some extra tax (because I have spilled into the higer rate) but how much?

And how is it calculated?

Thanks much for the help. Id hate to get this wrong ..........

[Robot]

£900 Net – Gross £1,000

£1,000 * 32.5% £325 less 10% tax credit = £225 payable on £900 net.

OR

25% of the net dividend

[ASB]

> 50k

Pickle,

Don;t forget that the IR591 rules mean some extra CT is payable if this years profits are < 50k

[pickle]

Re: &gt; 50k

Robot, thanks. 25% of anything net over my 28k limit is an easy way for me to think abuout it.

Seems a bloody lot dosn't it, considering they will have already had 19%CT

So to use my 2k tax relief from my VCT I'll just pay myself a net divi of 8k.

[CheesyNob]

Trying to work out what I owe on tax on my dividend.

When you say 'gross' dividend is that before CT or after CT removed ?

[ASB]

You don't owe anything yet. It's not due till 31/1/06 (assuming the divi was in the tax year just ended).

Since it all depends on your allowance and other income why not use one of the free online tax returns to do the calculation?

[CheesyNob]

Can you recommend one thats free and doesnt require me to put my NI details in ? Tried the MSN one but it wont give me figures unless I put NI number in, call me parniod but I dont trust them :hat

[ASB]

1) Try here www.taxcentral.co.uk/taxc...efault.asp

2) Dunno about NI numbers, but any old number with the same format as yours should probably do...