Taking a large dividend efficiently

[BeesKnees]

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?!

[cojak]

To pay the same tax as Rishi’s wife you’d need to pay a team of very expensive tax lawyers.

[northernladuk]

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?

[Maslins]

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.

[Fred Bloggs]

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.

[Snooky]

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.

[BlueSharp]

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.

[eek]

the payment on account for the following year is also larger.

That's a 30 second task to correct.

[Snooky]

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

[BlueSharp]

That's a 30 second task to correct.

Good point.