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Taking a large dividend efficiently

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    Taking a large dividend efficiently

    During the next couple of months, I will need to take a substantial amount of cash from my Ltd in order to finance a big house refurbishment. That, together with the rest of the living expenses, will push my dividend withdrawals deep into the upper tax rate. I considered taking a director's loan to alleviate the impact, but, apart from the interest I would need to pay, it would not be very beneficial.

    I'm sure I'm not the first one with this issue, so I was wondering if anyone knows the legal way to get over this without paying more tax than Rishi's wife.

    Anyone?!

    #2
    To pay the same tax as Rishi’s wife you’d need to pay a team of very expensive tax lawyers.
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
    - Voltaire/Benjamin Franklin/Anne Frank...

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      #3
      The legal way is to either take dividends in to higher rate of tax or to take a DL to alleviate the impact.

      HTH BIDI

      P.S. If you've got a complex tax situation why not speak to a specialist in tax i.e. your accountant?
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Especially given where we are in the tax year, worth considering how much to take pre/post 5 April 2023. Unsure which tax threshold you're approaching...but it's more tax efficient to earn £50k this year and £50k next than £75k this year £25k next. Same logic works at higher thresholds too, £100k each for two tax years means less tax than £125k this tax year £75k next.

        Afraid there's no magic bullet beyond the above to get cash out of a continuing company into your personal hands tax efficiently.

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          #5
          Originally posted by BeesKnees View Post
          During the next couple of months, I will need to take a substantial amount of cash from my Ltd in order to finance a big house refurbishment. That, together with the rest of the living expenses, will push my dividend withdrawals deep into the upper tax rate. I considered taking a director's loan to alleviate the impact, but, apart from the interest I would need to pay, it would not be very beneficial.

          I'm sure I'm not the first one with this issue, so I was wondering if anyone knows the legal way to get over this without paying more tax than Rishi's wife.

          Anyone?!
          I suggest to just be a good citizen and pay the tax that's legally due.

          Take a look at the HMRC Enquiries section here if you want to see what happens to you when you try to get too clever with tax.
          Public Service Posting by the BBC - Bloggs Bulls**t Corp.
          Officially CUK certified - Thick as f**k.

          Comment


            #6
            Originally posted by BeesKnees View Post
            During the next couple of months, I will need to take a substantial amount of cash from my Ltd in order to finance a big house refurbishment. That, together with the rest of the living expenses, will push my dividend withdrawals deep into the upper tax rate. I considered taking a director's loan to alleviate the impact, but, apart from the interest I would need to pay, it would not be very beneficial.

            I'm sure I'm not the first one with this issue, so I was wondering if anyone knows the legal way to get over this without paying more tax than Rishi's wife.

            Anyone?!
            Assuming you have a mortgage, have you looked into possibly extending the amount of the loan? As long as it allows overpayments and/or the repayment charges aren't prohibitive, you could repay the extra through dividends over several years in a way that might reduce your higher rate tax exposure, especially if you perhaps have a partner who's an equal shareholder but with a lower non-dividend income than you.

            Comment


              #7
              Don't take a large dividend is the simple answer. Can you take out a loan or add more to the mortgage to smooth out the cash flow for a few years? Remember if you do take a large div out not only do you have the tax to pay on it but the payment on account for the following year is also larger.
              Make Mercia Great Again!

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                #8
                Originally posted by BlueSharp View Post
                the payment on account for the following year is also larger.
                That's a 30 second task to correct.
                merely at clientco for the entertainment

                Comment


                  #9
                  Originally posted by BlueSharp View Post
                  Don't take a large dividend is the simple answer. Can you take out a loan or add more to the mortgage to smooth out the cash flow for a few years? Remember if you do take a large div out not only do you have the tax to pay on it but the payment on account for the following year is also larger.
                  You can submit a claim to reduce your POA, on the basis that your income for this tax year was unusually large and unlikely to be the same next year - https://www.gov.uk/hmrc-internal-man...manual/sam1001

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                    #10
                    Originally posted by eek View Post

                    That's a 30 second task to correct.
                    Good point.
                    Make Mercia Great Again!

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