Questions on dividends

[Gavwar]

Hi I'm quite new to contracting and I seem to come up with more and more questions everyday. These might seem a bit basic, but I would really appreciate some advice.

If I pay the shareholder (me) a dividend out of my companies profits do those dividends need to paid on specific dates in the year (i.e. end of the quarter) or can I chose the dates they are paid ?

Am I entitled to any tax credit on the dividend tax? I read somewhere it was 10% as I have already paid corporation tax.

Does anyone have any example documentation that can be used to issue a dividends pay out ?


Finally, a bit of a side question, as I am the company director and its only employee, if I should take a permanent role in the future can I issue a P45 to myself?

That's it for today............

Advice greatly appreciated.
Gavin

[lje]

If I pay the shareholder (me) a dividend out of my companies profits do those dividends need to paid on specific dates in the year (i.e. end of the quarter) or can I chose the dates they are paid ?

No - any dates will do.

Am I entitled to any tax credit on the dividend tax? I read somewhere it was 10% as I have already paid corporation tax.

If you pay yourself dividends up to the 40% bracket then you have no extra personal tax to pay. You will pay 20% Corporation Tax on the profit within the company but the 10% tax credit exactly matches the tax due.

However, if you pay yourself dividends over the 40% tax bracket level you will need to pay an additional 22.5% tax.

Does anyone have any example documentation that can be used to issue a dividends pay out ?

Google is your friend

Finally, a bit of a side question, as I am the company director and its only employee, if I should take a permanent role in the future can I issue a P45 to myself?

Yes

[northernladuk]

If you are coming up with so many questions and are stuggling to grap the basics you really would do well to get an accountant and go through this in detail. Not understanding what you know is difficult but you cannot understand what you don't know.

Doesn't help with your question I know but could save you cash in the long run.

[Pondlife]

If you are coming up with so many questions and are stuggling to grap the basics you really would do well to get an accountant and go through this in detail. Not understanding what you know is difficult but you cannot understand what you don't know.

Doesn't help with your question I know but could save you cash in the long run.

You're going all touchy feely mate.

You want to talk about it?




Sorry for trolling outside General Mods but it is a bit too out of character.

[Fred Bloggs]

Hi I'm quite new to contracting and I seem to come up with more and more questions everyday. These might seem a bit basic, but I would really appreciate some advice.

If I pay the shareholder (me) a dividend out of my companies profits do those dividends need to paid on specific dates in the year (i.e. end of the quarter) or can I chose the dates they are paid ?

Am I entitled to any tax credit on the dividend tax? I read somewhere it was 10% as I have already paid corporation tax.

Does anyone have any example documentation that can be used to issue a dividends pay out ?


Finally, a bit of a side question, as I am the company director and its only employee, if I should take a permanent role in the future can I issue a P45 to myself?

That's it for today............

Advice greatly appreciated.
Gavin

You need an accountant, it seems.

[SueEllen]

If you are coming up with so many questions and are stuggling to grap the basics you really would do well to get an accountant and go through this in detail. Not understanding what you know is difficult but you cannot understand what you don't know.

Doesn't help with your question I know but could save you cash in the long run.

WHS.

[Wanderer]

Hi I'm quite new to contracting and I seem to come up with more and more questions everyday. These might seem a bit basic, but I would really appreciate some advice.

If we give you some advice, will you promise to get an accountant. Seriously, you need one at least in your first year so you can figure out how to structure your company properly and get some good advice about your specific circumstances so you don't go making any expensive mistakes than can easily cost you thousands (I'm not joking).

If I pay the shareholder (me) a dividend out of my companies profits do those dividends need to paid on specific dates in the year (i.e. end of the quarter) or can I chose the dates they are paid ?

The general rule is that you can pay dividends whenever you have profit in the company to pay them out of. But how much profit do you have in your company? Don't take too much or you could end up in big trouble over directors loans or for trading while insolvent. Your accountant will do the calculations for you, tell you how much to put aside for tax, vat etc and which expenses you can legitimately claim for.

Am I entitled to any tax credit on the dividend tax? I read somewhere it was 10% as I have already paid corporation tax. Does anyone have any example documentation that can be used to issue a dividends pay out ?

They are pretty simple, have a look here. Once again, if you make a mess of it the HMRC may make you restate the dividend as salary and pay a bomb of tax on it. Get an accountant to get all this up and running for you.

Finally, a bit of a side question, as I am the company director and its only employee, if I should take a permanent role in the future can I issue a P45 to myself?

Sure! Normally the accountant will sort all this out for you. But you will have to point to yourself in the mirror and say "You're Fired!".


You've also got to register for PAYE, self assessment, perhaps VAT and flat rate scheme, P11d, IR35, annual returns and a whole lot of other stuff. It looks easy to begin with then all these forms and stuff start arriving, you make a mess of it and then get fined or investigated. There are some helpful accountants who post/advertise here, why not get in touch with one of them and sleep easy.

[Greg@CapitalCity]

Covered off nicely

Your questions have been covered off nicely, I have just a couple of things to add;
(1) The 10% tax credit on your dividends is notional, and yes, you are entitled to it - all dividends get paid with a 10% tax credit. Just be careful with the calculation - its 10% on the gross dividend payment. So if you paid yourself a £1,000 dividend, your NET income is £1,000. The tax credit is 1/9 of this amount = £111.11. So your GROSS dividend payment (which is what gets used in your personal tax calculation) is £1,111.11. And you see 10% of £1,111.11 is the tax credit amount attached to your dividend.

(2) Re the P45 - yes, so long as your company is registered for PAYE in the first place. So if you have come from perm work, file the P45 you recd through your new company payroll, run your payroll for the duration of your contracting using a salary level that you think is appropriate, and once you have finished, issue yourself a P45 and close down your PAYE account (there are some steps I have skipped here like filing your annual PAYE returns etc);