does profit include paid dividends

[linzi686]

Hi ive got a couple questions hoping someone can help... im thinking of going ltd (small business only takes around £550pw)

1. what should i pay myself as a wage to keep tax and NI at a minimum? (make it up in dividends)
2. is the profit of the business looked at minus the dividends paid or including them?

thanks

[NotAllThere]

1. FAQ - try google
2. Including

[xoggoth]

Dividends do not affect profit, they are paid from the net profit after all deductions like expenses, salary, employer NI and CT.

Think salary thing has been covered on CUK so search here first. Not that everyone agrees.

[northernladuk]

There are some guides in the right hand column that cover all of this in great detail.

[linzi686]

Ive spent about 8 hours solid searching for answers

Sorry if i seem thick but does that mean my company would pay corporate tax on the dividends or just on whats left at the end of the year?

thank you so much for you help

[mudskipper]

Ive spent about 8 hours solid searching for answers

Sorry if i seem thick but does that mean my company would pay corporate tax on the dividends or just on whats left at the end of the year?

thank you so much for you help

Your company pays corporation tax on all profits.
You then take divvis from what's left. (So yes, you pay corp tax on dividends)

Different accountants advise different things salary-wise. You definitely need an accountant, so get one and see what they suggest.

[MarillionFan]

There are some guides in the right hand column that cover all of this in great detail.

Can you draw a diagram please?

[linzi686]

Can you draw a diagram please?

Very helpful thanks.....

cheers everyone else

[linzi686]

my point is i cant see the benefit of me going limited if your dividend gets taxed by the company (me) at 20% before they get given to the employee (me). Therefore i'm paying the tax anyway. From what i'm getting i would be better off staying as a sole trader paying 22% on my earnings, less personal allowance, rather than going through the hassle of going ltd to just save paying 2% extra tax.

Or have i got this wrong?

[malvolio]

Very helpful thanks.....

cheers everyone else

These are basics. You'd get more respect if you tried thinking.

Anyway, in a nutshell -

Gross income excluding VAT minus business expenses (no, look them up yourself) minus salary minus employment-related taxes equals gross profit.

Gross profit minus corporation tax equals net profit.

Net profit equal funds available for paying out as dividends.

That's assuming you want to clean out the company and not do something intelligent like leave some for bench time. In which case you build up retained profits which are tax paid and available for dividends later on. But that's getting a little complicated for now.

If you can't understand any or all of that, tough; you have no capability to be running a company.

HTH