Ltd Company - tax on dividends

[BillHicksRIP]

Thank you!

[Onyerbike]

Hi

the company would pay me a salary of £10k and a dividend of £26,101. The tax/NI on the salary would be about £1,484 and the 'higher rate tax' on the dividend would only be £222.63. How is this possible, wouldn't the dividend be taxed at 10% or 32.5%?? I've no idea why the tax on the dividend would be so low. Is this a con and is there a risk that the Inland Revenue would come after me for more tax at a later date if I use this method?

Thanks

A salary of £10K would incurr tax at £10000 - personal allowance @5K(roughly) - 1st 2000@ 10% =£200- NI contributions =£500(no idea exact figure) which gives us say £2300 to be taxed @ 22% = £506
The rest is paid in dividends which is the profit of your company so for you with no expenses to deduct would be £26K @ 19% = £4900 to add to that would be the extra for exceeding the limit which seems to be £225 for each £1000 over £30K
So basically its £2300@ 22%
£20K@ 19%
£6K @ 22%
This is of course a rough estimate but if i have got these figures wildly wrong then someone (accountants welcome) please nod in.

[Waldorf]

A salary of £10K would incurr tax at £10000 - personal allowance @5K(roughly) - 1st 2000@ 10% =£200- NI contributions =£500(no idea exact figure) which gives us say £2300 to be taxed @ 22% = £506
The rest is paid in dividends which is the profit of your company so for you with no expenses to deduct would be £26K @ 19% = £4900 to add to that would be the extra for exceeding the limit which seems to be £225 for each £1000 over £30K
So basically its £2300@ 22%
£20K@ 19%
£6K @ 22%
This is of course a rough estimate but if i have got these figures wildly wrong then someone (accountants welcome) please nod in.

A lesson on why you should appoint an accountant!!

[Nixon Williams]

A salary of £10K would incurr tax at £10000 - personal allowance @5K(roughly) - 1st 2000@ 10% =£200- NI contributions =£500(no idea exact figure) which gives us say £2300 to be taxed @ 22% = £506
The rest is paid in dividends which is the profit of your company so for you with no expenses to deduct would be £26K @ 19% = £4900 to add to that would be the extra for exceeding the limit which seems to be £225 for each £1000 over £30K
So basically its £2300@ 22%
£20K@ 19%
£6K @ 22%
This is of course a rough estimate but if i have got these figures wildly wrong then someone (accountants welcome) please nod in.

This looks confused!

On a salary of £10000 you would pay PAYE of £834.30 and employee NIC of £546.15 leaving you with net pay of £8619.55

The company would pay NIC on this salary of £635.52

If the company had pre-tax profits of £26000 the CT would be £4940

This would leave £21060 that could be paid as a dividend.

If this was your only income there would be no extra tax to pay as the total is below the higher rate threshold.

So the net income would be £21060+£8619.55 = £29679.55

If the income had exceeded the higher rate threshold then the extra tax on the dividends would be 22.5% of the gross dividends that exceeded the higher threshold.

I hope this is clear!

Alan

[andy]

Can the whole year's divi of £25200 for year 2007 can be taken in advance , say at the start of year in April 2007

[Nixon Williams]

Can the whole year's divi of £25200 for year 2007 can be taken in advance , say at the start of year in April 2007

Dividends can only be paid from profits, so if you have the profits to do this then you can take the dividend on 6th April.