Fixed term contract & dividend payments?

[jayn200]

At least you are consistent anyway.

As are you . Im sure you're a joy to work with.

[rawly]

The rate at which you pay higher Tax is also related to the amount you pay into your pension pot(s) also. This raises the limit you start paying Tax at a Higher rate. So, if you've put £8,000 into a personal pension pot, then this will raise the limit you pay lower Tax by £10,000, as an example.

[avgjoe]

Thanks all, that's cleared it up for me!

[northernladuk]

Hi all

I'm considering taking a FTC role for a year. In the meantime, I also have money in my limited company (from contracting). Assuming I took a dividend this year to top up my earnings, how would the self assessment calculation work for Jan 2022 (or even Jan 2023)?

The proposed salary is 75k p.a, and I am considering a dividend of 20k (this year). I am also thinking of pausing my salary payment from the LTD company (just to simplify the structure this year as I imagine that would make the calculation even more complex).

Would I just pay 7.5% on 18k (assuming the first 2k is free), or is it a more complex calculation given that I am also working as a permie (effectively)

Any advice would be highly appreciated! Can't seem to get a decent answer online.

TIA

You'd ask your accountant and get them to do it for you. They will advise the most efficient way to handle your money based on the figures you supply them.

[northernladuk]

Sorry yeah that was stupid on my part. You're right completely.

At least you are consistent anyway.

[Paralytic]

Sorry yeah that was stupid on my part. You're right completely.

Some could actually fall into 32.5% bracket - depends on his Ltd company and FTC income for this year. If the FTC salary would take him over this limit, it might be worth him putting as much of the FTC into a pension this tax year, to enable a larger dividend to be paid.

And for that, he should speak to his accountant

[jayn200]

Not enough information was provided to be able state this.

If he pays the £20K dividend this year, and starts the £75K contract in (say) March, then the tax bill next Jan will be on

Ltd company salary for 20/21 + £18K dividends + FTC salary paid in 20/21.

If he has only paid, eg, £12,500 from his Ltd company, then its likely the dividend will be taxed at 7.5%

Sorry yeah that was stupid on my part. You're right completely.

[Paralytic]

You'd pay 32.5% on 18k based on the info provided unfortunately.

Dividends are taxed after your salary. So your dividends would be taxed as 75-95k which all falls under higher rate which is 32.5% (minus 2k allowance).

Not enough information was provided to be able state this.

If he pays the £20K dividend this year, and starts the £75K contract in (say) March, then the tax bill next Jan will be on

Ltd company salary for 20/21 + £18K dividends + FTC salary paid in 20/21

[jayn200]

You'd pay 32.5% on 18k based on the info provided unfortunately.

Dividends are taxed after your salary. So your dividends would be taxed as 75-95k which all falls under higher rate which is 32.5% (minus 2k allowance).

[jamesbrown]

Dividends form the top slice of income.

Payments on account can be changed to reflect reality (with emphasis on reality here, because you will pay interest if you underestimate).

For actual figures, you should have an accountant and you should ask them to provide the figures.

[Paralytic]

Assuming you mean pay the dividend in this tax year (20/21), then you'd need to share what other income you have in that same tax year. ie. how much will you have been paid from your Ltd this tax year, and how much will have come from the FTC this year.

Plug those numbers into one of the many online tax calculators, and you'll get your answers

Generally, if your other income falls into the higher bands, your dividends will also be taxed higher band (eg, 32.5%).

If you want to defer payment of the dividend tax till Jan 2023, do the same for next tax year - what other income do you expect etc.

This is really basic stuff, however - so if you're not clear, find an accountant to ask.

[avgjoe]

Hi all

I'm considering taking a FTC role for a year. In the meantime, I also have money in my limited company (from contracting). Assuming I took a dividend this year to top up my earnings, how would the self assessment calculation work for Jan 2022 (or even Jan 2023)?

The proposed salary is 75k p.a, and I am considering a dividend of 20k (this year). I am also thinking of pausing my salary payment from the LTD company (just to simplify the structure this year as I imagine that would make the calculation even more complex).

Would I just pay 7.5% on 18k (assuming the first 2k is free), or is it a more complex calculation given that I am also working as a permie (effectively)

Any advice would be highly appreciated! Can't seem to get a decent answer online.

TIA