Max Dividend Question

**malvolio** · 19 December 2010, 12:27

Originally posted by BrandNewCUKUser View Post

Hi,

I just wanted to check the figures that I had from my accountant about the maximum amount of dividends I could take out of my limited company without hitting the 100K limit where I'd start to lose my personal allowance.

I pay myself a minimum wage salary (of 12K) and have a standard personal allowance of £6,475. My accountant tells me I can take 28K in dividends and stay out of the higher rate tax bracket. I can take a further £51,200 (£79,200 in total) which will take me up to the 100K limit. Has anyone else (or any of the accountants) done the same calculations? Do those figures sound about right?

Thanks,

BrandNewCUKUser

I dunno. Minimum wage is £10k pa, near as damnit. Higher rate starts at £47k, 50% band starts at £150k. Dividend income is effectively tax free up to that £47k. So I'm sorry but I don't understand your numbers. Have you thought about asking an accountant? Oh, you have, haven't you...

But yes, they are in the ball park.

**BrandNewCUKUser** · 19 December 2010, 13:07

I don't earn enough to have to worry about 50%. It's the income limit here: HM Revenue & Customs: Personal Allowance that I'm trying to avoid (with extra pension contributions). It means you're lumped with an effective marginal tax rate of 62% on income between 100K and 112K..

**VectraMan** · 19 December 2010, 13:42

£100K - £12K = £88K * .9 = £79,200.

Remember that dividends have a 10% tax credit, which is why you can't take £88K.

**BrandNewCUKUser** · 19 December 2010, 17:45

OK thanks, that makes sense.

**decentguy** · 27 December 2010, 07:40

My Calculations

During one of my meetings with my accountant mentioned that:
Myself and my wife (50% shareholder) can take combined dividends of £55,200 per year. On the top of this, I pay myself £12k Salary per year.

Although my accountant is good most of the time, I personally think that I am paying myself and my wife less dividends and all extra income (after paying salary and divident) is sitting in company's bank account earning mere and rubbish 0.1% interest.

If personal limit for taking dividend is £37k per person, Surely I should pay myself and my wife £37k x2 = £74k in total in dividends as opposed to what I am paying right now (as mentioend above, 55k)

Is my Maths correct? I absolutely hate it when money sits in company bank account with least interest.

**VectraMan** · 27 December 2010, 09:40

Originally posted by decentguy View Post

Is my Maths correct?

No. You've forgotton a) your salary, and b) the 10% tax credit.

The maximum dividend is ~£34K, assuming no salary, so your wife gets ~£34K and you get £34K-£12K = ~£22K. Add the two together and you get ~£55K.

**BolshieBastard** · 27 December 2010, 10:16

Originally posted by BrandNewCUKUser View Post

Hi,

I just wanted to check the figures that I had from my accountant about the maximum amount of dividends I could take out of my limited company without hitting the 100K limit where I'd start to lose my personal allowance.

I pay myself a minimum wage salary (of 12K) and have a standard personal allowance of £6,475. My accountant tells me I can take 28K in dividends and stay out of the higher rate tax bracket. I can take a further £51,200 (£79,200 in total) which will take me up to the 100K limit. Has anyone else (or any of the accountants) done the same calculations? Do those figures sound about right?

Thanks,

BrandNewCUKUser

You have an accountant but want a second opinion from unqualified people on here?

Why not tell you're accountant you want one of his partners to confirm his calculations instead?

**decentguy** · 27 December 2010, 10:35

Originally posted by VectraMan View Post

No. You've forgotton a) your salary, and b) the 10% tax credit.

The maximum dividend is ~£34K, assuming no salary, so your wife gets ~£34K and you get £34K-£12K = ~£22K. Add the two together and you get ~£55K.

Makes a bit more sense now...Thanks

**decentguy** · 27 December 2010, 10:36

Originally posted by BolshieBastard View Post

You have an accountant but want a second opinion from unqualified people on here?

Why not tell you're accountant you want one of his partners to confirm his calculations instead?

Sometimes unqualified people with practical experience has more knowledge than qualified accountants...My accountant is 1 man army so no partner I am afraid. Thanks..;-)

Max Dividend Question