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Dividends and Taxation

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    #11
    Originally posted by Danielsjdaccountancy View Post
    Also, don't forget those dreaded payments on account!

    HMRC will want half of that again on 31st Jan 12 and the other half 31st July 12, so budget for this. Unless of course you don't expect to take such a high earning in the 12/13 tax year, in which case you can reduce with an SA303 claim.
    Good point.

    It is another of the reasons that I never stray beyond the 40% threshold

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      #12
      thanks

      Thanks everyone for your feedback.

      St

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        #13
        Reading the paper about the tax thresholds for next year, I see that although the personal allowance is to be increased, the higher rate band is to be reduced, so in effect the 40% tax will still be payable on income over £42475 - so effectively a pay freeze for those who only take dividends upto the 40% band.
        "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero

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          #14
          Why £7068?

          Originally posted by Sockpuppet View Post
          could
          Why that amount?

          The tax threshold is 7475 & the NI is 5304 - surely its better to take 5304 as salary & avoid NI for employee & employer? & the rest as dividends?

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            #15
            Originally posted by KittyCat View Post
            Why that amount?

            The tax threshold is 7475 & the NI is 5304 - surely its better to take 5304 as salary & avoid NI for employee & employer? & the rest as dividends?
            £7,068 is the maximum you can take before NI or tax apply, assuming a normal tax code. Paying that level also ensure you get credit for your state pension.
            ContractorUK Best Forum Adviser 2013

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              #16
              ?

              Originally posted by Clare@InTouch View Post
              £7,068 is the maximum you can take before NI or tax apply, assuming a normal tax code. Paying that level also ensure you get credit for your state pension.
              The maximums I listed are from the HMRC site? If I take over 5304 in salary surely I have to pay the NI?

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                #17
                I see!

                Originally posted by KittyCat View Post
                The maximums I listed are from the HMRC site? If I take over 5304 in salary surely I have to pay the NI?
                Should have finished reading the page first - I see - up to & including ST - 136 per week

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                  #18
                  Originally posted by KittyCat View Post
                  The maximums I listed are from the HMRC site? If I take over 5304 in salary surely I have to pay the NI?
                  No, there are different NI limits:

                  Lower earnings limit, primary Class 1 - this is the £5,304, and the minimum you must earn to get NI credit, even though you don't pay any NI

                  Primary threshold - £139 a week or £7,228 a year, the point where employee NI kicks in

                  Secondary threshold - £136 or £7,072 a year, the point where employer NI kicks in (when calculating an annual salary it's actually £7,068).

                  Tax then applies, on a normal tax code, from £7,475.


                  http://www.hmrc.gov.uk/rates/nic.htm
                  Last edited by Clare@InTouch; 1 December 2011, 11:20. Reason: Add link
                  ContractorUK Best Forum Adviser 2013

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                    #19
                    Originally posted by Clare@InTouch View Post
                    No, there are different NI limits:

                    Lower earnings limit, primary Class 1 - this is the £5,304, and the minimum you must earn to get NI credit, even though you don't pay any NI

                    Primary threshold - £139 a week or £7,228 a year, the point where employee NI kicks in

                    Secondary threshold - £136 or £7,072 a year, the point where employer NI kicks in (when calculating an annual salary it's actually £7,068).

                    Tax then applies, on a normal tax code, from £7,475.


                    HM Revenue & Customs: National Insurance Contributions
                    Thanks - can you just take the 7068 as a lump sum & avoid operating a payroll? or do you have to submit certain forms for the salary to hmrc? The last couple of years I've just taken all dividends!

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                      #20
                      Originally posted by KittyCat View Post
                      Thanks - can you just take the 7068 as a lump sum & avoid operating a payroll? or do you have to submit certain forms for the salary to hmrc? The last couple of years I've just taken all dividends!
                      You'll need a PAYE scheme set up, so you'll have to file nil PAYE returns each quarter and a P35 each year. You can file nil returns each quarter here: HM Revenue & Customs: No PAYE/NICs payment due

                      Plus potentially a P11D, although getting a dispensation in place will prevent most of the admin on that one.

                      The £7,068 is the annual figure, and if paid in one lump sum then NI would be due (as anything over the weekly limit incurs NI). You could simple pay £589 per month.

                      It's worth paying as there's no tax or NI due, you get pension credit, plus you get a CT deduction, so it's better than paying wholly dividends for a lot of people.
                      ContractorUK Best Forum Adviser 2013

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