Dividents/No Dividents

[secontrator]

Hi all,

Iam running a LTD company for the last 1 year and now i have taken a permie route....spoken with accountant and he asked to keep draw the dividents... is it perfectly legal to draw the dividents whil iam employed in full time somewhere else... slightly worried...

Also, he told me the dividents is 40,000£.. is it true? i thought it is £24,000

Could someone clarify plz.

Thanks.

[Craig@Clarity]

Hi all,

Iam running a LTD company for the last 1 year and now i have taken a permie route....spoken with accountant and he asked to keep draw the dividents... is it perfectly legal to draw the dividents whil iam employed in full time somewhere else... slightly worried...

Also, he told me the dividents is 40,000£.. is it true? i thought it is £24,000

Could someone clarify plz.

Thanks.

Hi secontrator,

It all depends what you want to do with your LTD company i.e. whether you wish to retain it or close it down. If you wish to retain it, the question would be whether you need the extra cash from your company or to leave it in there. If you need the extra cash alongside your permie job, then you can declare and pay "dividends" up to the available profits left in the company. It is absolutely fine to do this. If you don't need the extra cash, you can simple leave it in the company until the next time you decide you either want the money or go contracting again.

However, if you wanted to close your company down because you now have a permie role, provided that you qualify for entrepreneurs relief, you would be better off paying the remaining profits from your company as a capital distribution rather than as a dividend. If you don't qualify for entrepreneurs relief, the remaining profit would have to be treated as a dividend.

Not sure whether £40k dividends is true or not. I assume this figure relates to the retained profit in your company???

[jmo21]

I presume you are talking about dividends.

"he asked to keep draw the dividents" - what did he actually say? Did he say "You can keep drawing dividends"?

Yes you can, but it will affect your tax position.

"he told me the dividents is 40,000£"

I presume this was something about the upper threshold for higher rate tax payers?

[secontrator]

I presume you are talking about dividends.

"he asked to keep draw the dividents" - what did he actually say? Did he say "You can keep drawing dividends"?

Yes, he told me that i can keep draw dividents.

Yes you can, but it will affect your tax position.

This is what i wanted to know.. and exactly hw my position gets affected....

"he told me the dividents is 40,000£"

I presume this was something about the upper threshold for higher rate tax payers?

He told me that £40,000 is for a year!

[DaveB]

He told me that £40,000 is for a year!

I'm guessing English is not your native language. It sounds like you do not understand what your accountant is telling you, nor do you understand the basics of the UK tax system.

I suggest you go back to your accountant and ask them to explain it again and this time make sure you understand what he is telling you.

You *can* draw Dividends while working in your new job.
If your new job pays over the earnings limit for higher rate tax you will need to pay tax on those dividends, or whatever part of them takes you over the higher rate limit.