Amount of dividend versus profits

[rascal]

Some sums. Nice and simple ones
£10k in company. Take £4k as salary. No tax to pay on any of that.
The £6k that's left attracts £1,140 CT. So you now have £4860 you can take as dividends.
The dividend attracts 7.5% tax on £2860, whioch is £214.50.
Leaving £8645.50 in your pocket.

This is not correct. He still £8.5k left of his personal allowance, in addition to the £2k dividend allowance.
That would leave £8860 in his pocket, but still worse off than doing it the other way.

[WordIsBond]

Did you pay CT last year? If so, there's a way you can get some of it back.

If not, do you think you might pay CT next year? If so, there's a way you can reduce it.

But it depends on what you do between now and 6 April, and that action will not have any effect on your tax for this year.

The CT you save WILL force you to learn something. If you are currently out of contract and have loads of time anyway, spend the time and save the money. If you are working and earning money, just pay someone else (an accountant) for the knowledge.

Pretty simple, really. But you've not even done the research before coming on here and asking questions and you aren't likely to get much respect for your questions as a result. If you want to save accountancy fees then SPEND THE TIME to do it right.

You aren't even asking the right questions here.....

[Lance]

This is not correct. He still £8.5k left of his personal allowance, in addition to the £2k dividend allowance.
That would leave £8860 in his pocket, but still worse off than doing it the other way.

I'm not sure how I'm not correct. Dividend tax free allowance only applies to the first £2k of dividend, and as far as I'm aware is immaterial to your personal allowance.... But then again I use an accountant so I don't care too much...

[TheCyclingProgrammer]

I'm not sure how I'm not correct. Dividend tax free allowance only applies to the first £2k of dividend, and as far as I'm aware is immaterial to your personal allowance.... But then again I use an accountant so I don't care too much...

The £2k dividend allowance applies to the first £2k of dividends that aren't already covered by the personal allowance. That means you could potentially have up to £14.5k of tax-free dividends if you have no other income at all.

[Lance]

The £2k dividend allowance applies to the first £2k of dividends that aren't already covered by the personal allowance. That means you could potentially have up to £14.5k of tax-free dividends if you have no other income at all.

Yes. Indeed.

So in my example how have i got it wrong? Or have I, as I suspect, got it right?
Purely academic interest....

[rascal]

The dividend attracts 7.5% tax on £2860, whioch is £214.50.

This bit is wrong.

[Lance]

This bit is wrong.

thanks for the detailed breakdown....

I got it now. Took a little while.

[northernladuk]

thanks for the detailed breakdown....

I got it now. Took a little while.

Ficko!!!