Reply to: NI and thresholds etc

[northernladuk]

Guys n gals... The OP has asked his accountant and not understood. He's read a clear link and it's still not sunk in. Can we stop posting links and give him an answer he can understand, preferably as short and concise as possible... Something like yes or no. :

[WordIsBond]

Interesting and pretty clear (dunno about accurate) guide on the figures for next year including new divi tax here...

Best Directors Salary and Dividend Levels 2016/17 - JF Financial : Accountants

Nice article. Now if some bright accountant would write one that gives a third option: using the tax advantages of benefits-in-kind between the NI threshold (£8060) and the personal allowance (£11000). Then everyone would be smarter still.

[The Spartan]

https://www.gov.uk/government/public...ance-factsheet

There are some good examples there to get your head round it.

There were good examples in the link NLUK posted but he still couldn't get his head around the it

[TheFaQQer]

seems to indicate its zero on this first £5000? Thats not right is it? If that was the case you'd 'save £1000 on that first £5000 and not be "down" until you paid out £13333 dividend.

https://www.gov.uk/government/public...ance-factsheet

There are some good examples there to get your head round it.

[The Spartan]

Not according to the expert I was talking to about it.

I may have confused "alphabet" and "preference" though - one is and one isn't.

Fair enough, I'm definitely no expert on alphabet shares. I like to keep it simple, just like me

[TheFaQQer]

Aren't the use of alphabet shares a whole world of hurt? Especially if HMRC come knocking?

Not according to the expert I was talking to about it.

I may have confused "alphabet" and "preference" though - one is and one isn't.

Edit - no, I was right first time. Alphabet shares, fine; preference shares not fine.

Edit 2 - this could be particularly useful if you have a partner with low / no dividend income. Because they can get £5k tax free even if they are a 40% tax payer.

[The Spartan]

And if you had an alphabet share for your wife that paid a dividend at a different rate, then you could pay them £5k (minus any other dividend income) and that would be tax free too.

Aren't the use of alphabet shares a whole world of hurt? Especially if HMRC come knocking?

[pr1]

You mean divi tax right?

Well work it out 32k divi's @ 7.5% = £2,400
Where as 27k divi's @7.5% = £2,025

So you don't pay any tax on the first 5k after the personal allowance.

should be "so you don't pay any additional tax on the first 5k..."

(yourco already paid 20% corporation tax on it - you needed to make £6250 profit to distribute that £5000 dividend)

[TheFaQQer]

You mean divi tax right?

Well work it out 32k divi's @ 7.5% = £2,400
Where as 27k divi's @7.5% = £2,025

So you don't pay any tax on the first 5k after the personal allowance.

And if you had an alphabet share for your wife that paid a dividend at a different rate, then you could pay them £5k (minus any other dividend income) and that would be tax free too.

[The Spartan]

Ah but is it totally tax free as in no CT for the first £5K or just as before but without the extra 7.5%

You mean divi tax right?

Well work it out 32k divi's @ 7.5% = £2,400
Where as 27k divi's @7.5% = £2,025

So you don't pay any tax on the first 5k after the personal allowance.

[psychocandy]

The first 5k doesn't attract the dividend tax so it's:

11K Personal Allowance

5k divi's @ 0%

27k divi's @ 7.5% = £2025 tax payable to HMRC

Total £43k

Ah but is it totally tax free as in no CT for the first £5K or just as before but without the extra 7.5%

[psychocandy]

so you're a sheep then? You are allowed to ask questions, especially when you're paying for their expert advice.

Or is it you're just looking to get a rise out of NLUK?

Bah!!!!!!!!!

I have asked them and they have explained but I am a bit dull :-)

[The Spartan]

Nice on NLUK. Useful post for once :-)

One thing which I may have got wrong in my head. The first £5K. I assumed this was taxed as normal? i.e. as we do now. And only anything ABOVE £5K accrued the extra 7.5% on top.

But this bit in that article:-

A new dividend allowance has been introduced which means that an individuals first £5,000 of dividends are tax free.

seems to indicate its zero on this first £5000? Thats not right is it? If that was the case you'd 'save £1000 on that first £5000 and not be "down" until you paid out £13333 dividend.

The first 5k doesn't attract the dividend tax so it's:

11K Personal Allowance

5k divi's @ 0%

27k divi's @ 7.5% = £2025 tax payable to HMRC

Total £43k

[The Spartan]

Hey spartie butti !!!! I just follow what my accountant recommends!

so you're a sheep then? You are allowed to ask questions, especially when you're paying for their expert advice.

Or is it you're just looking to get a rise out of NLUK?

[psychocandy]

Interesting and pretty clear (dunno about accurate) guide on the figures for next year including new divi tax here...

Best Directors Salary and Dividend Levels 2016/17 - JF Financial : Accountants

Nice on NLUK. Useful post for once :-)

One thing which I may have got wrong in my head. The first £5K. I assumed this was taxed as normal? i.e. as we do now. And only anything ABOVE £5K accrued the extra 7.5% on top.

But this bit in that article:-

A new dividend allowance has been introduced which means that an individuals first £5,000 of dividends are tax free.

seems to indicate its zero on this first £5000? Thats not right is it? If that was the case you'd 'save £1000 on that first £5000 and not be "down" until you paid out £13333 dividend.