Deferring dividends

[Dark Black]

I have a quick question relating to dividends:

If I defer taking a dividend on this tax year's (07/08) profits until next year will it count against my tax allowance for next year (08/09) or can I use any outstanding tax allowance from this year?

I'm not sure I'm being very clear there. For example:

Given I have say, £5000 profit left from the year 07/08 and my taxable income is at least £5000 less than that which would push me into the high rate tax band, if I defer taking the dividend until the next tax year will it count towards my income (and hence lower rate tax allowance) for 08/09 or (since it was accrued in the previous year) can it be still count against the previous year as if I had drawn it then?

[Ruprect]

you are liable for personal tax in the year you personally receive it. You shoudl declare the dividend and there should be a paper trail associated with this, so if the dividend is paid in 08/09 it will count against your 08/09 tax liability.

Think of company and personal separately and consider when you receive the monies personally, and this should help you figure these things out.

[Dark Black]

Thanks, yep I do always make the distinction between company and personal accounts, kinda thought that would be the case.

So I presume that most people will ensure they draw right up to the maximum lower rate tax band each year rather than leaving it in the company to cover bench time?

[Ruprect]

makes sense to draw it to minimise your tax liability - you can clways keep it outside the company for bench time if you want!

[ASB]

I have a quick question relating to dividends:

If I defer taking a dividend on this tax year's (07/08) profits until next year will it count against my tax allowance for next year (08/09) or can I use any outstanding tax allowance from this year?

I'm not sure I'm being very clear there. For example:

Given I have say, £5000 profit left from the year 07/08 and my taxable income is at least £5000 less than that which would push me into the high rate tax band, if I defer taking the dividend until the next tax year will it count towards my income (and hence lower rate tax allowance) for 08/09 or (since it was accrued in the previous year) can it be still count against the previous year as if I had drawn it then?

Ok, so your objective is to uses all you basic rate band. Assuming you have the profit in the company:-

1) Declare the dividend in 07/08.
2) Credit the directors current account

You have now received the income in 07/08 thus ensuring you use the basic rate band.

3) Draw the money from the directors current account at your leisure during 08/09.

Note: some accounts would recommend physically paying it and lending it back to the company so a physical transaction rather than a nominal one is visible.