Tax on Dividends

[minstrel]

Does the salary that I earned back when I was a permie, count towards the total GROSS Salary when calculating dividend payments?

Yes

[Bluebird]

The way I am understanding this is that the tax you "might" have to pay on dividends is based on your personal circumstances and has nothing at all to do with whether you now have a company or not.

Basically any income can affect this which could be salary, dividends [ for either your own company or any shares you may have in any other companies ] + any other income you need to declare [ capital gains ? - or is this covered by a seperate tax ? ]

[Hiram King Of Tyre]

Just to clarify, dividends are paid out of post declared profits so the Co would have already paid 19%, then once your over the £38,xxx threashold you personally pay 22%? Below the threashold though, you pay no personal tax?

[VectraMan]

Just to clarify, dividends are paid out of post declared profits so the Co would have already paid 19%, then once your over the £38,xxx threashold you personally pay 22%? Below the threashold though, you pay no personal tax?

Correctomundo.

[Hiram King Of Tyre]

Thanks...looks like stick to 38k then!

Out of interest, if you're in the 10% bracket ang take a company car, do you pay at 10% or does the BIK take you into the 22% bracket?

[Bigbird]

Can I just make something clear here? There is never a situation where there is "no tax payable on dividends" as some of you seem to be implying.

Dividends are charged to tax at 10% on gross income up to the Higher Rate level, but as you get a 10% credit on them on your dividend voucher that element is effectively "pre-paid" for you and you personally wil not need to pay any further tax on them.

Over the HR limit they are taxed at 32.5% but the credit of 10% still applies, leaving a tax balance of 22.5% to be paid by you when you submit your tax return.

[VectraMan]

Can I just make something clear here? There is never a situation where there is "no tax payable on dividends" as some of you seem to be implying.

Dividends are charged to tax at 10% on gross income up to the Higher Rate level, but as you get a 10% credit on them on your dividend voucher that element is effectively "pre-paid" for you and you personally wil not need to pay any further tax on them.

Over the HR limit they are taxed at 32.5% but the credit of 10% still applies, leaving a tax balance of 22.5% to be paid by you when you submit your tax return.

Which just shows how ridiculously over-complicated our tax system is. They couldn't just say "zero tax" they have to say "10% tax with a 10% credit".

[Novice Contractor]

Tax on Dividends

RE' "You need to add all the GROSS income including salary, dividends, interest and any benefits in kind that you may have such as cars, private health etc".
Is it not the case that profit is calculated after salary, expenses and pension contributions are deducted from turnover? Corporation tax is payable on profits @ 19%. Dividends do not incur employer's or employee's NIC contributions but do incur income tax at a fixed rate of 22.5%.

[Novice Contractor]

Tax on Dividend

This is interesting stuff. I am paying myself a salary of £35k per annum. In my first trading year (ending January 2007) I made a profit on which I paid 19% corporation tax. After corp' tax I have a retained profit (I have taken £10k dividends). My accountant tells me that the dividends are taxable at 22.5%, earlier responses would suggest that I do not have to pay tax on my dividends if my salary is £35k, which is correct. Also if I put a large amount into a pension fund (say £12k per annum) is there any tax downside?

[Novice Contractor]

Can I just make something clear here? There is never a situation where there is "no tax payable on dividends" as some of you seem to be implying.

Dividends are charged to tax at 10% on gross income up to the Higher Rate level, but as you get a 10% credit on them on your dividend voucher that element is effectively "pre-paid" for you and you personally wil not need to pay any further tax on them.

Over the HR limit they are taxed at 32.5% but the credit of 10% still applies, leaving a tax balance of 22.5% to be paid by you when you submit your tax return.

I've just been reading backwards through the thread, and now realise that
dividends plus salary = income. I was advised by my accountant to pay myself a liveable salary to avoid attracting attention from the IR. I haven't nee paying myself monthly dividends becasue I wanted to build up a bufer for when I am between assignments . I have taken two ad-hoc £5k dividends, now I am wondering if I am doing the right thing or should reduce my salary and pay myself monthly dividends? HELP!!