Reply to: Calculation of Tax with Dividends

[SueEllen]

Neither of the two other contractors on my site had heard of the new divvy tax.

The particularly clueless one had even just done a 'yearly review' with his BigCo contractor accountant and either hadn't listened or it wasn't explained to him.

My guess is that for quite a few the realisation (read: mini tax bombshell that hasn't been saved for) isn't going to hit home until January 2018, that being the SAR deadline for the current tax year.

Haven't listened.

[Contreras]

I imagine quite a few contractors are still playing with the optimal level of their dividends for the previous tax year if their company tax year hasn't yet closed and they haven't yet filed their self-assessment return for 2015/16 (particularly if they have only just realised the horror of the new tax rates this year!).

Neither of the two other contractors on my site had heard of the new divvy tax.

The particularly clueless one had even just done a 'yearly review' with his BigCo contractor accountant and either hadn't listened or it wasn't explained to him.

My guess is that for quite a few the realisation (read: mini tax bombshell that hasn't been saved for) isn't going to hit home until January 2018, that being the SAR deadline for the current tax year.

[craigy1874]

Well I hope they aren't clients of mine then!

[dingdong]

Bit late for that now, isn't it?

I imagine quite a few contractors are still playing with the optimal level of their dividends for the previous tax year if their company tax year hasn't yet closed and they haven't yet filed their self-assessment return for 2015/16 (particularly if they have only just realised the horror of the new tax rates this year!).

[CloudWalker]

take the dividend now, then buy a delorean to take to twin pines mall at 1:21 am?

"great scott"

[kaiser78]

Bit late for that now, isn't it?

Good spot - corrected below;

My accountants had suggested taking out a larger dividend for yr 2015/16 than the £32k, and a lower one in yr 2016/17 as a way of reducing the overall tax liability over those 2 financial years, as a result of the new dividend tax.

[missinggreenfields]

Bit late for that now, isn't it?

Take the dividend now, then buy a Delorean to take to Twin Pines Mall at 1:21 am?

[jonnieboy]

My accountants have suggested taking out a larger dividend for yr 2015/16 than the £32k, and a lower one in yr 2016/17 as a way of reducing the overall tax liability over those 2 financial years, as a result of the new dividend tax.

Bit late for that now, isn't it?

[kaiser78]

Yes, the £5,000 dividends rate at 0% is included within the basic rate band.

So, with a salary of £11,000 and dividends of £32,000, to take your total income to £43,000. You will pay £2,025 income tax on your dividends.

Then any dividends thereafter will be taxed at 32.5%.

My accountants have suggested taking out a larger dividend for yr 2015/16 than the £32k, and a lower one in yr 2016/17 as a way of reducing the overall tax liability over those 2 financial years, as a result of the new dividend tax.

[PerfectStorm]

It's shocking to have to pay 32.5% on top of the 20% CT already subtracted

Then 20% on the VATable goods you go on to buy, or stamp duty on your house...

[Louisa@InTouch]

Only an accountant would put a happy smiley after informing us about what tax we need to pay

And yes a face, as there's bigger things to be unhappy about. Large APN's, IR35 and bad weather!

[TheCyclingProgrammer]

46% overall though, rather than 52.5% (still not great though!)

And still presumably less than you'd pay if you could pay yourself a bonus via PAYE once you factor in employers and employees NIC (not that you could do this with dividends being taxed as the top slice).

[Andrew@Wisteria]

It's shocking to have to pay 32.5% on top of the 20% CT already subtracted

46% overall though, rather than 52.5% (still not great though!)

[Cirrus]

It's shocking to have to pay 32.5% on top of the 20% CT already subtracted

[northernladuk]

Yes, the £5,000 dividends rate at 0% is included within the basic rate band.

So, with a salary of £11,000 and dividends of £32,000, to take your total income to £43,000. You will pay £2,025 income tax on your dividends.

Then any dividends thereafter will be taxed at 32.5%.

Only an accountant would put a happy smiley after informing us about what tax we need to pay