Max "Tax free" div come April 6th

[d000hg]

for the dividends, yes, however there will be the monthly salary payment each month too..

So is maximum take-home before higher tax (using £8292 / £10k salaries which seem to be equivalent last year / this year) increasing or decreasing?

[TheCyclingProgrammer]

So is maximum take-home before higher tax (using £8292 / £10k salaries which seem to be equivalent last year / this year) increasing or decreasing?

Take home is near identical, but your corporation tax bill will be about £200 lower.

[Martin at NixonWilliams]

So is maximum take-home before higher tax (using £8292 / £10k salaries which seem to be equivalent last year / this year) increasing or decreasing?

I'm not sure what the £8,292 is but the take home before paying higher rate tax is better next year.

If you compare a £7,696 salary + dividends for 2013/14 with a £10,000 salary + dividends for 2014/15, the 2013/14 take home is £38,075 whereas the 2014/15 take home is £38,433, so you are roughly £358 better off.

Plus, as TCP says, there is an additional CT saving too - In this example there would be an extra saving of £461, being the difference between £7,696 and £10,000 multiplied by 20%.

[Scrag Meister]

That's correct - Remember to consider any other taxable income you have such as bank interest, property income etc.

So starting Mid March I will also have a rental bringing in some more, from this I can deduct expenses and interest and pay 40% of the remainder as tax.?

Or the tenants pay cash and I put it in a shoe box under my bed?

[Clare@InTouch]

So starting Mid March I will also have a rental bringing in some more, from this I can deduct expenses and interest and pay 40% of the remainder as tax.?

Or the tenants pay cash and I put it in a shoe box under my bed?

You may well pay 20%, as rental income is taxed before dividends.

To work out the maximum dividend you can take before higher rates you simply take the higher rate limit of £41,450, reduce by any other income, then divide by 10 and x by 9.

So £41,450 less your salary of £12,000 ( or whatever, then plus other gross income like bank interest, rental profit etc) leaves £29,450 /10x9 = £26,505.

Deduct from that any dividends paid to date, and what's left is what is remaining available to take before higher rates. Any dividends above that limit will be taxed at effectively 25% of the net.

[Goatfell]

Or the tenants pay cash and I put it in a shoe box under my bed?

Would you be claiming the cost of the shoe box as an expense or a capital purchase?

As long as you didn't keep your own money in it you shouldn't have a problem with the "wholly and exclusively" test . . .

[Scrag Meister]

You may well pay 20%, as rental income is taxed before dividends.

To work out the maximum dividend you can take before higher rates you simply take the higher rate limit of £41,450, reduce by any other income, then divide by 10 and x by 9.

So £41,450 less your salary of £12,000 ( or whatever, then plus other gross income like bank interest, rental profit etc) leaves £29,450 /10x9 = £26,505.

Deduct from that any dividends paid to date, and what's left is what is remaining available to take before higher rates. Any dividends above that limit will be taxed at effectively 25% of the net.

Thanks for this, is this time related at all?

i.e is the situation different if I take a div in April 14 v a Div in Mar 15, when combined with rental income over the year?

[d000hg]

I'm not sure what the £8,292 is

Oops, £691 is what I pay myself monthly including expenses, I meant a salary of £7696.

[Martin at NixonWilliams]

Thanks for this, is this time related at all?

i.e is the situation different if I take a div in April 14 v a Div in Mar 15, when combined with rental income over the year?

From a tax point of view there is no difference.

There may be other benefits / drawbacks in taking the dividends at different times. For example, by taking the dividends earlier in the year it gives you a chance to invest the money sooner, this can be helpful if you need a deposit for a house or something like that.

[Scrag Meister]

From a tax point of view there is no difference.

There may be other benefits / drawbacks in taking the dividends at different times. For example, by taking the dividends earlier in the year it gives you a chance to invest the money sooner, this can be helpful if you need a deposit for a house or something like that.

Ok quick example to aid my understanding

Salary 12k, Tax, NI paid through PAYE
Rental gross 725 per month
Rental expenses 125 per month

Do I pay 20% on the £600 per month?

Then no more personal tax on a div up to 20399.40?

and 25% on any further net dividend.