going over the normal dividend tax barrier

[stacks]

I've so far kept my salary & dividends to a small amount but I now have surplus cash in the company account that I want to get my hands on. I understand that I can take the rest as a futher dividend but this would mean paying an additional 25% tax as it will take me over the normal tax threshold.

This additional 25% tax - is it classed as further corp tax or as PAYE? Also when/how is it paid, do I just leave the 25% in the comp account and pay it when the bill comes through?

[TheFaQQer]

I've so far kept my salary & dividends to a small amount but I now have surplus cash in the company account that I want to get my hands on. I understand that I can take the rest as a futher dividend but this would mean paying an additional 25% tax as it will take me over the normal tax threshold.

This additional 25% tax - is it classed as further corp tax or as PAYE? Also when/how is it paid, do I just leave the 25% in the comp account and pay it when the bill comes through?

It's neither PAYE nor corporation tax - you pay it, not the company. You need to declare it on your tax return and pay tax on it that way.

[stacks]

So I pay myself the whole amount as a dividend and then pay 25% of it from my personal account when the personal tax return is due?

[r0bly0ns]

Yep

[VectraMan]

So you don't have to pay until Jan 2009. If you can hold on until April, you won't have to pay until Jan 2010, and it means if things go tits-up for you next year and you don't earn enough, you won't have to pay any tax on that surplus. That's what I'm doing anyway.

[hgllgh]

So I pay myself the whole amount as a dividend and then pay 25% of it from my personal account when the personal tax return is due?

i think you only pay the additional 25% on dividends above the threshhold though, so anything above 39K attracts the additional 25%.

[boredsenseless]

i think you only pay the additional 25% on dividends above the threshhold though, so anything above 39K attracts the additional 25%.

Its 32.5%...

[r0bly0ns]

With a 10% tax credit cause it's a dividend......

[Hex]

Just to clarify, tax on dividends is 10% up to the top of the standard tax band and 32.5% after that.

You're dividend comes with a 10% tax credit that satisfies anything below the higher rate threshold. Above the higher rate threshold you then have to pay 32.5% of the GROSS dividend (i.e. the dividend plus the 10% tax credit). The 10% tax credit reduces this to 22.5%. This 22.5% is the same as 25% of the NET dividend.

So if you pay a dividend of £9,000 then this equates to a GROSS dividend of £10,000 with a Tax Credit of £1,000.

The 10% tax credit satisfies the basic rate tax.

If you are already above the higher rate threshold before receiving this dividend then you owe higher rate tax. If you calculate 32.5% of £10,000 you get £3,250 that you owe. You can subtract the tax credit from this so that means you actually owe £3,250 - £1,000 = £2,250 tax owed.

You can get to this figure much more easily by just taking 25% of the original £9,000 NET dividend you actually paid out. 25% of £9,000 is £2,250.

[MrRobin]

What is the exact value of the higher rate threshold where you have to pay the extra on divis?

I know the 40% income tax band starts at income over £34600, but do you add the £5225 personal allowance onto this?

So if my ltd pays me a salary of £11k, how much can I take in divi's a year without attracting extra tax?

£34600 + £5225 - £11000 = £28825?

Or is it 90% of £28825 because of the reasons Hex was talking about - making it £25924