Max dividend calculator

[Olly]

Hi there, please does anyone have a formula / link / ssheet to calculate the max dividend that can be withdrawn from my Ltd without paying additional tax.

I take 6K gross salary and expect £600 in gross interest payments, no other income.

Is 30K dividend right? Thanks

[pmeswani]

Hi there, please does anyone have a formula / link / ssheet to calculate the max dividend that can be withdrawn from my Ltd without paying additional tax.

I take 6K gross salary and expect £600 in gross interest payments, no other income.

Is 30K dividend right? Thanks

You are entitled, if memory serves, to take out £43,800 combined Salary and Dividends before you pay tax on Dividends. However, if you take out £6k in Salary a year, you will be, if I understand it, liable to National Insurance Contributions.

[Olly]

Yes, a small amount PAYE and NI.
Please can you explain how that would affect the max dividend possible before paying further tax?

[pmeswani]

Yes, a small amount PAYE and NI.
Please can you explain how that would affect the max dividend possible before paying further tax?

Afraid I can't. I'm not an Accountant or have a full understanding of Taxation. I just accept what my Accountant tells me, and if I feel it is the right judgement, then I go for it. If I don't understand it, I ask them questions. I'm sure someone will point you in the right direction. However, I would suggest speaking to an Accountant, after all they are paid to make sure you are paying yourself the right amount.

[Olly]

the accountant I pay monthly for said 30K
....it sounds a bit too much like a round number and perhaps a bit low.

They've made mistakes before that's why I'd like to double check...I'm sure it can't be a difficult calculation, I just don't know what it is

[Archangel]

You are entitled, if memory serves, to take out £43,800 combined Salary and Dividends before you pay tax on Dividends. However, if you take out £6k in Salary a year, you will be, if I understand it, liable to National Insurance Contributions.

Its 40,836 (34,800 @ 20%, 6036 free)

So if you knock off your salary of 6000 and interest of 600 you end up with
a GROSS dividend of 34,236 which is a net dividend of (drum roll please) 30,812.

So 30k is not a bad estimate.

[pmeswani]

Its 40,836 (34,800 @ 20%, 6036 free)

So if you knock off your salary of 6000 and interest of 600 you end up with
a GROSS dividend of 34,236 which is a net dividend of (drum roll please) 30,812.

So 30k is not a bad estimate.

My apology, I was under the misunderstanding that it was £43,800. Not sure where the other £3k came from. If the OP takes a lower PAYE salary, would he be more likely be able to get the most out of his dividend contributions?

[slackbloke]

There are other factors involved, like meeting the NI threshold and also appearing to work a proper week, i.e 37 hours X minimum wage.

My apology, I was under the misunderstanding that it was £43,800. Not sure where the other £3k came from. If the OP takes a lower PAYE salary, would he be more likely be able to get the most out of his dividend contributions?

[Olly]

There are other factors involved, like meeting the NI threshold and also appearing to work a proper week, i.e 37 hours X minimum wage.

How are those factors "involved"?
Paying yourself min wage for a job which would normally pay 35 or 45K a year is a lame way to protect yourself...it "might might might" make a tax investigation less likely but there's no way you can argue 10K a year as a fair IT salary, assuming that's what you are proposing.

NI threshold...yes do that...I suppose we all do...6K is above it.

[slackbloke]

It has nothing to do with what the job would be 'worth'.
If you work 37 hours a week then at the minimum wage of 5.73 your annual salary would be c£11K. It has nothing to do with whether it will make a tax investigation likely. It does however matter if you are being investigated and you have to explain why you are only working 20 hours a week to make you salary equate the minimum wage but you are billing a client for 37 hours a week.

How are those factors "involved"?
Paying yourself min wage for a job which would normally pay 35 or 45K a year is a lame way to protect yourself...it "might might might" make a tax investigation less likely but there's no way you can argue 10K a year as a fair IT salary, assuming that's what you are proposing.

NI threshold...yes do that...I suppose we all do...6K is above it.