Reply to: Going into higher rate dividend band

[Darren at Fox-Bartfield]

Self Assessment

If dividend tax is due on basic and/or higher rate tax, is this treated as a business expense and paid from the business account or, because it is part of your individual self-assessment, payable from my personal bank account?

Any help is appreciated.

A personal tax liability payable on investment income declared on a personal self assessment return should be paid from your personal bank account.

[handyandy]

If dividend tax is due on basic and/or higher rate tax, is this treated as a business expense and paid from the business account or, because it is part of your individual self-assessment, payable from my personal bank account?

Any help is appreciated.

It is NOT a business expense but if you were accounting for it under PAYE then it could be paid by your LTD as part of the PAYE and NIC's that they collect from you as an employee on behalf of HMRC. But it comes out of your personal gross pay and your LTD can only do this if HMRC have issued a notice of coding that includes it.

Otherwise it will come out of your personal bank account when you do you tax return at the end of the year and settle up anything you owe HMRC.

However, your accountant should be doing this for you if you have taken a payroll and personal tax return service from them. If you are having to ask these questions then you NEED to take those services from a qualified accountant.

HA

[northernladuk]

I think you need to understand what you do a little better. Personal tax is a business expense? Really? :|

[Saint John]

Who pays the dividend tax?

If dividend tax is due on basic and/or higher rate tax, is this treated as a business expense and paid from the business account or, because it is part of your individual self-assessment, payable from my personal bank account?

Any help is appreciated.

[Louisa@AardvarkAccounting]

Don't HMRC pay interest if you have paid more tax than is due?

I have a sneaking suspicion that you don't get early payment interest on payments on account. But HMRC are kind enough to refund any over-payments.

[TheCyclingProgrammer]

One thing to watch is that they won't just ask for the tax you owe, but tax for the next year too. So if you take a lot or you can end up in a tax death spiral. You have to declare extra dividends the next year to pay the tax that you wouldn't owe if you didn't have to declare the dividends to pay the tax in advance.

By Jan, you should have a good idea what your tax should be for the current tax year (unless you take dividends unexpectedly between Jan-Apr) so you can just reduce your payments on account to whatever you think they should be (it won't be nil anymore but most of us should only be paying a couple of grand in dividend tax if we stay basic rate payers, so half of that).

[ruasonid]

But if it's only a one-off that you are going to take this level of income, can you ask to reduce the following year's POA in advance.

Just remember to do this, or you'll be waiting longer for HMRC to give you your money back, if you are planning on taking less taxable income next year.

Don't HMRC pay interest if you have paid more tax than is due?

[Louisa@AardvarkAccounting]

But if it's only a one-off that you are going to take this level of income, can you ask to reduce the following year's POA in advance.

Just remember to do this, or you'll be waiting longer for HMRC to give you your money back, if you are planning on taking less taxable income next year.

[hugebrain]

I may need to take out a slightly higher dividend this year (an extra £6k) and go into the higher-rate dividend tax band.

Apart from paying tax at 32.5% on the additional dividend rather than 7.5%, are there any disadvantages? Is the mere fact that I'm in the higher divi bracket have any repercussions?

thanks

One thing to watch is that they won't just ask for the tax you owe, but tax for the next year too. So if you take a lot or you can end up in a tax death spiral. You have to declare extra dividends the next year to pay the tax that you wouldn't owe if you didn't have to declare the dividends to pay the tax in advance.

[Louisa@AardvarkAccounting]

If you're claiming childcare vouchers your tax free amount changes if you become a higher rate taxpayer

The childcare voucher limits are based on 'relevant earnings' (effectively salary + taxable benefits).

It doesn't include dividend income.

[pr1]

If you're claiming childcare vouchers your tax free amount changes if you become a higher rate taxpayer

[EinsteinTax]

Personal Savings Allowance

The Personal Savings Allowance (amount of tax free savings income you can receive each year) also drops from £1,000 to £500 when you go into higher rate band.

https://www.gov.uk/government/public...ings-allowance

[Maslins]

What NLUK said.

If you make lots of money and want it in your hands, you're going to pay fairly sizeable amounts of tax. There are ways to avoid that tax, but most of the legal ones revolve around not getting that money into your hands to spend right now (eg putting it into a pension/leaving it in the company).

[Louisa@AardvarkAccounting]

If your income goes over the £50K bracket, don't forget about the child benefit tax charge (in you are claiming any - as some of this could be clawed back on your self assessment).

[northernladuk]

Nope. You're just get hung up on the figures that's all. Don't let the tax dog wag the tail. Take what you need, live your life, pay the tax and off you go... Oh and hang up the tin foil hat on the way out