First Year Contracting - Can I Take A Dividend Before End Of Tax Year

[joey122]

I did search but could not find an answer - I m in my first year or contracting with end of tax year in Aug. Can I pay myself a dividend before August? Is that allowed or do you have to wait for year end to do that?

Also how exactly do you pay a dividend ? Can you just wothdraw the money and declare it? Can you also pay historic dividend? ie a divi paid on 6th April which is included in the 09/10 tax year/?

[Fred Bloggs]

What did your accountant say when you asked him/her?

[malvolio]

WHS.

Or read the guides. Try the SJD one.

Or given your current 100% strike rate on stupid questions so far, have you done any preparation at all for running your own company? It is not a game, you can get into trouble if you don't know the basics. And as we keep saying, we're not here as a reference library. You want to be a contractor, you have to put in some effort of your own.

[DS23]

have you made a shed load of money for your company?

if yes you can probably take some out as a dividend. you will need to work out gross and net and the portions of vat and tax. got any leftovers? your dividend comes out of that but since your year isn't up make sure you account for future events.

[TheFaQQer]

What did your accountant say when you asked him/her?

For those that are offended by such responses, I'll paraphrase....

This really is such basic knowledge that you should discuss running a company with someone who knows something about it.

In answer to the OP - if you have profit, then you can take a dividend. I take mine once the accounts are done at year end, so I know that I'm not taking a dividend illegally. If you take one when there is no profit then it's illegal (although some accountants will be able to manipulate the accounts to indicate that it was a loan rather than a dividend).

HTH.

[MarillionFan]

To the OP. Yes, you may pay a dividend during the year.

Obviously we will all say, talk to your accountant, but as a rule of thumb for the least 13 years I have always done the following

Wages - tax allowance - now £600 per month
Home Office - £120 per month rent
Expenses - as much as I can put through which are in due course to the business
Equipment - as much as I buy

Then. At the end of the quarter, I do a quick spreadsheet and would take 80% of what I deem profit.

At the end of the year, I would give all I have done to my accountant and told him to work out what I am owed or what I owe. Lots of posters will tell you to 'play it safe' 'only do what the accountant says'. This is in fact bollocks. Work within the framework as you understand, and just understand you may be a little ahead or behind at year end.

Thats why I pay an accountant.

[lje]

As other posters have said - yes you can take a dividend before the end of your company's 1st year.

Also, you can take a dividend before the end of the tax year (although remember that 6th April is the start of the new tax year so any dividend would need to be declared at an earlier date (not on 6th April) if you want it to count towards the 2009/2010 tax year for income.

However, you should not take out any more money that you currently have as profit. You can't take out all of the money in your bank account with the assumption that your company will get more money in before the VAT or NI is due to be paid (for example). Any tax payment which you are currently liable to must remain in the company after your dividend has been removed.

Personally I use Freeagent and it gives me an estimate of how much I could take as a dividend at any time. Very useful.

[escapeUK]

Everytime you want some wages (lol) and you have profit. IE money in less tax and vat, you can take it as a dividend.

However, you should not take out any more money that you currently have as profit. You can't take out all of the money in your bank account with the assumption that your company will get more money in before the VAT or NI is due to be paid (for example).

I must admit this is something I have wondered. If the amount of dividends over the year is equal to profit and all taxes are paid does it matter?

What if next month I buy a £5000 server which means I have spent the corporation tax and vat. Does that mean this months dividend is illegal?

Does the tax man care if in Feb when I paid a dividend I put aside the corp tax, or do they care that I paid no dividends in Feb & March next year as all that money was the tax mans? The result is the same in corporation tax. However it would enable me to maximise my income this financial year while keeping in the lower tax band and reduce the amount that drifts into higher band next year.

[MarillionFan]

Unlike PAYE or Self Employed. Your LTD company is judged on a years accounts. At the end of the day, if I take too much out, it is deemed a director loan and at the end of the year you pay it back.

Simples.

[MarillionFan]

Unlike PAYE or Self Employed, your LTD company is judged on a years accounts. At the end of the day, if I take too much out, it is deemed a director loan and at the end of the year you pay it back.

Simples.