Optimizing dividends

**pickle** · 3 July 2007, 10:55

**VectraMan** · 3 July 2007, 10:56

It's per year. It doesn't matter whether you take divs monthly, quarterly, daily if you want, if you don't take your full allowance (~£35K - salary) by 5th April then yes you will have wasted that.

Pay runs, wages and tax on wages are nothing to do with dividends.

**Bluebird** · 3 July 2007, 10:58

Originally posted by trigger

Hi All

I'm new to this forum. I usually ask my accountant these questions but he's on holiday so I thought I'd post it here instead.

My query is one re dividends, and essentially optimizing it. I have been thinking about it quite intently, and wanted opinions re below...

I am in two minds as to whether I should take a dividend every month or not. It seems to me that if I don’t, I almost “waste an opportunity” to extract that dividend from my company account for that particular ‘payrun’. Looking at it another way, if you look at the tax on wages almost as the “cost” of taking out a dividend, then, this month for instance, given that I am not short on cash, if I choose NOT to take a dividend, I have then wasted this “opportunity” to get the dividend….and it will “cost” me (the tax of another wages transaction) in the future, to take out the dividend.

So I am not therefore better off taking a dividend out every invoice (month)??

Hope this made sense!

Cheers
trigger

you can take out dividends as often as you like.

you need to think of the wages and dividends as 2 seperate transactions - they can both happen at the end of the month, but wages are generally monthly and divis as and when YOU choose.

The best way to do this is make SEPERATE payments from Your Co to your personal bank account and make the transactions "Wages" and "Dividend" rather than lump them up together.

**el duder** · 3 July 2007, 11:04

Originally posted by VectraMan

It's per year. It doesn't matter whether you take divs monthly, quarterly, daily if you want, if you don't take your full allowance (~£35K - salary) by 5th April then yes you will have wasted that.

Pay runs, wages and tax on wages are nothing to do with dividends.

sorry is there an allowance on dividends then?

**Ardesco** · 3 July 2007, 11:06

Originally posted by el duder

sorry is there an allowance on dividends then?

you can take what you like, but you don't want to go into higher tax rate.

**Bluebird** · 3 July 2007, 11:08

Originally posted by el duder

sorry is there an allowance on dividends then?

up to a certain amount about £38k if your income INCLUDING dividends is less you don't pay tax on them, if it's abobe the £38k then you do pay tax on the amount OVER the £38k

Teh £38k includes GROSS SALARY + other income such as bank a/c interest ect.

You can get round this by have 2 shareholder who each have 50% shares, and therefore each gets a £38 threshold

**VectraMan** · 3 July 2007, 11:17

Originally posted by Bluebird

up to a certain amount about £38k if your income INCLUDING dividends is less you don't pay tax on them, if it's abobe the £38k then you do pay tax on the amount OVER the £38k

What have Adobe got to do with it?

You have to take into account the 10% credit. So it's your salary + ( dividends + 10%) has to be less than £38K.

Somebody said the taper relief thing might be toast before long, so if that's true then there's little reason to leave money in the company, unless you think you might be out of work in the following year.

**Xenophon** · 3 July 2007, 11:20

Originally posted by Ardesco

you can take what you like, but you don't want to go into higher tax rate.

How the hell do you suvive on that!?

**trigger** · 3 July 2007, 11:24

@pickle:

It's per year. It doesn't matter whether you take divs monthly, quarterly, daily if you want, if you don't take your full allowance (~£35K - salary) by 5th April then yes you will have wasted that.

Pay runs, wages and tax on wages are nothing to do with dividends.

Ok, but let's say hypotetically my contract finishes Dec this year, and I don't draw from my company account for six month (say because I'm away in Canada skiing for the season).

If I then go to draw from my account in May 2008, are you then saying I can just draw a dividend, without first initiating a wages transaction??

Optimizing dividends