last month of tax year - query

**Flat Eric** · 28 February 2007, 17:11

I was under the impression that the date for tax purposes was the date of the invoice and not the actual payment date. I'd raise the invoice this year, dated as such on your accounts.

I must add though that I'm not an accountant so YMMV...

**Nixon Williams** · 28 February 2007, 17:26

For a personal perspective the dates that are important are the dates the salary/dividends are payable, if these are in 2006/07 then these will be included in the current tax year.

**THEPUMA** · 28 February 2007, 18:05

You can declare a dividend equating to your profits. To simplify this I would take your day rate multiplied by the number of days you work between now and 05/04/06. Then deduct any expenses incurred in this period (remembering that it is beneficial to minimise these, assuming you are correct that any consequent dividend will fall below the higher rate tax threshold). Then take 81% of this figure and declare this (with supporting documentation) as a dividend.

Just to clarify, I assume that your salary for YTD plus any other income plus (your dividend x 100/90) will not exceed £38,335. Otherwise the limiting factor should be the maximum dividend in this equation. ie X = 90% x [£38,335 - salary YTD - any other income (gross)]

**Mr_Z** · 28 February 2007, 19:06

Originally posted by Nixon Williams

For a personal perspective the dates that are important are the dates the salary/dividends are payable, if these are in 2006/07 then these will be included in the current tax year.

Thanks. Excuse my ignorance but March will be the first month i work (and trade as a limited company if i decide to do this). Therefore the money the agency pays me in April will be the first payment into the business a/c. If i declare a dividend etc before the end of the tax year will there have to already be money in the business account to cover it?

May be a daft question....but i'll ask it anyway!

**oraclesmith** · 28 February 2007, 20:21

You must have sufficient profit to make the divi legal and it must be actually paid in this tax year to count as this years income. What you are asking is if an invoice issued in this financial year is sufficient evidence of profit to warrant paying a dividend.

I don't know the exact answer - but I doubt it would be feasible because although you have a sale and therefore a credit in your trading account, the company doesn't actually have money in the bank to make the payment in the current tax year - unless it took out a loan. Ie. it doesn't have accumulated realised profits. Anyhow, I doubt whether the Board of a regular company would attempt to issue dividends on the strength of owed money.

As I understand it, the shareholder must actually receive the money in the tax year in which they regard it as income.

In my opinion.

**ASB** · 1 March 2007, 11:40

Originally posted by Mr_Z

Thanks. Excuse my ignorance but March will be the first month i work (and trade as a limited company if i decide to do this). Therefore the money the agency pays me in April will be the first payment into the business a/c. If i declare a dividend etc before the end of the tax year will there have to already be money in the business account to cover it?

May be a daft question....but i'll ask it anyway!

The profit exists as a result of the trading activity, not the bill being settled. This profit can be declared as a dividend (although it cannot be paid until you have the funds or an overdraft).

When the dividend is declared this is credited to the directors current account and you simply become a creditor. From a view of the date you can find some guidance on HMRC webtulipe, however since it is a dividend not salary then it is the date of declaration that is relevant.

**oraclesmith** · 1 March 2007, 12:11

Aren't there some tax implications of having a non-zero DLA at the end of the tax year ?

**ASB** · 1 March 2007, 12:20

Originally posted by oraclesmith

Aren't there some tax implications of having a non-zero DLA at the end of the tax year ?

Not that I am aware of if it is credit.

If it is in debit that is a different matter.

**Mr_Z** · 15 March 2007, 19:29

thanks for replies so far. Still a bit confused by this - be great if someone could clarify.

In a nutshell -

1. will earn approx 6.5k in March, and have over 7k personal tax earnings allowance left in this current tax year until i hit the circa 38k upper 40% tax limit. (PAYE permie job for first half of year then time off until last month)

2. Paid via brolly currently, but they won't receive funds from my agency for March work until after April 6th, so say they will class it as next years tax year when they pay me. This means i can't use my remaining tax allowance, so i will pay full whack tax, not just lower rate.

3. If i set-up a ltd company and cut the brolly out of the equation, is there a
way to pay myself this money in this tax year? I can invoice the agency on 1st April for March's money (ie this tax year, for work done in this tax year), but cleared funds won't reach my business bank account until the new tax year. I can loan the business bank account money if necessary, but otherwise there won't be any money at all in the account until i get paid around April 10th
I don't care if this is dividend or all salary etc if this is possible, just want to be able to make use of my remaining 06/07 lower tax allowance.....

Realise the above replies may have answered this but if anyone can clarify in simple terms what my options are it would be great.... i am intending to go ltd anyway soon but will do this now if it's beneficial for the above...

last month of tax year - query