Dividend on Self Assessment

[mexsix]

Hi,

I am putting down dividends paid out by my Ltd Co on the 'Dividends from UK companies' on the self assessment form. So when I get my calculation it has my profits on the business as taxable income including the dividends that I have as additional income.

Am I supposed to declare the same dividend payments as salary expenses? Or how do I reduce the profit on the business so I'm not paying double on the dividends?

If someone can explain to me why you pay for profits on the business account in the self assessment and not corporation tax it would be helpful.

Thanks

[Gonzo]

Hi,

I am putting down dividends paid out by my Ltd Co on the 'Dividends from UK companies' on the self assessment form. So when I get my calculation it has my profits on the business as taxable income including the dividends that I have as additional income.

Am I supposed to declare the same dividend payments as salary expenses? Or how do I reduce the profit on the business so I'm not paying double on the dividends?

If someone can explain to me why you pay for profits on the business account in the self assessment and not corporation tax it would be helpful.

Thanks

I think that your needs warrant much more than can be covered in a bulletin board post. Why not try this book for some guidance :

linky (SFW)

The usual response to people showing that they don't have even a rudimentary understanding is to "get an accountant". Presumably you are completing your 2007/2008 return, an accountant would have been able to help you avoid the fines that you will now be receiving.

[Archangel]

Briefly.

Example 1
The company makes a profit of £10,000. It pays corporation tax on this at say 21%. Profit after corp tax = £7,900.

Company pays a dividend of £7,900 to individual A. This also carries a nominal tax credit of £877.77 (7900 / 9).

individual A has no other income. On his tax return he enters £7,900 as the net dividend, £877.77 as the tax credit and £8,777.77 as the gross dividend.

When the tax is calculated, the first £34,800 of dividend income is taxed at 10%, so as there is a 10% tax credit then no further tax is due. (i.e. the basic rate tax has been paid by the company).

Example 2
The company makes a profit of £100,000. It pays corporation tax on this at say 21%. Profit after corp tax = £79,000.

Company pays a dividend of £79,000 to individual A. This also carries a nominal tax credit of £8,777.77 (79000 / 9).

individual A has no other income. On his tax return he enters £79,000 as the net dividend, £8,777.77 as the tax credit and £87,777.77 as the gross dividend.

When the tax is calculated, the first £34,800 of dividend income is taxed at 10%, so as there is a 10% tax credit then no further tax is due. (i.e. the basic rate tax has been paid by the company) on £34,800.

On the amount above £34,800 the dividend payment attracts a higher rate of 32.5% so £87,777.77 - £34,800 = £52,977.77. £52,977.77 * 32.5% = £17,217.77 so £17,217.77 will be owed in tax by Individual A.

(the above calc assumes Individual A has a zero tax code, for simplification purposes)

HTH

[mexsix]

Hi,

Thank you for the replies. I understand dividends, however in example 1 the 7.9k is paid as dividends and declared as 'Dividends from UK companies' but also forms 'Profit from self employment'. Essentially this amount also shows up as taxable income unless it can be deemed as salary/wages expenses (or elsewhere).

My understanding is the self assessment is for personal tax only, so why would business profits be added to my taxable income? Should that not form part of the corporation tax?

Thanks

[Tax Lord]

Hi,

Thank you for the replies. I understand dividends, however in example 1 the 7.9k is paid as dividends and declared as 'Dividends from UK companies' but also forms 'Profit from self employment'. Essentially this amount also shows up as taxable income unless it can be deemed as salary/wages expenses (or elsewhere).

My understanding is the self assessment is for personal tax only, so why would business profits be added to my taxable income? Should that not form part of the corporation tax?

Thanks

First of all you are not self employed, you are a director of a Limited Company. So put the gross dividend amount in 'dividends from UK companies'.

Second, on your personal tax return you must disclose all personal income, so dividends must be included. You will not pay any personal tax on dividends if you are a basic rate tax payer.

[Archangel]

Hi,

Thank you for the replies. I understand dividends, however in example 1 the 7.9k is paid as dividends and declared as 'Dividends from UK companies' but also forms 'Profit from self employment'. Essentially this amount also shows up as taxable income unless it can be deemed as salary/wages expenses (or elsewhere).

My understanding is the self assessment is for personal tax only, so why would business profits be added to my taxable income? Should that not form part of the corporation tax?

Thanks

You clearly do not understand dividends!

Dividends are paid by Limited and PLC companies.
This is not "Profit from self employment".

Self employed is not the same as limited company.

employment is not the same as sel employed or limited company.

The self assessment is for all your income:

From Dividends
From Employment
From Self employment

Any income should only fall into one of the above categories.

[rl4engc]

You're not self employed, you're an employee of your limited company. When I filled mine in I just put all the net dividends I'd reveived from my company in the "Dividends received from UK Companies" box, and £0.00 in the box to do with "Money from a Managed Service Company". I think this box is basically to highlight one man band subbies to HMRC without then having to do loads of investigative work. But since to the absolute best of my knowledge I'm not a MSC, I put £0.00 in.

When I ran the calcs it turned out they owed ME £472 (I'd been a permie for part of the year paying tax PAYE). This was paid about 2-3 days after submitting the form.

[Alan @ BroomeAffinity]

Get a tax professional

Reading your posts, I would suggest that you are missing an understanding of the fundamentals of completing a tax return and you should get someone to at least look the return over before you submit it. What about the accountant who prepared your company's accounts? Can't he/she help?

[nevergoingtopay]

Reading your posts, I would suggest that you are missing an understanding of the fundamentals of completing a tax return and you should get someone to at least look the return over before you submit it. What about the accountant who prepared your company's accounts? Can't he/she help?

I agree, get your company accountant to check it/do it....mine charges about £100 to do my SA each year due to having lots to fill in on the form.