going over the normal dividend tax barrier

[malvolio]

How do you mean an ongoing thing? Like if I paid the full £25k in one go, they'd presume that I'd be paying £25k each and every month? Presumption is the mother of all noddy ups. No wonder HMRC use this method!

I've already taken some divis this year, I'll try and spread the remaining over the next few months up until April. Thanks for the advice.

No, they assume divi payments per year will continue at roughly the same level. Totally wrong asumption for the jobbing contractor, of course, but there you go.

[MrRobin]

Also note the slight gotcha - Hector will assume this divi payment to be an ongoing thing, so you will be asked to pay 50% of that higher rate tax in advance for next year, in two chunks in January and June.

How do you mean an ongoing thing? Like if I paid the full £25k in one go, they'd presume that I'd be paying £25k each and every month? Presumption is the mother of all noddy ups. No wonder HMRC use this method!

I've already taken some divis this year, I'll try and spread the remaining over the next few months up until April. Thanks for the advice.

[malvolio]

I beleive that this is the correct figure.


But I am not an accountant etc...

Also note the slight gotcha - Hector will assume this divi payment to be an ongoing thing, so you will be asked to pay 50% of that higher rate tax in advance for next year, in two chunks in January and June. Good way to spoil Christmas...

There's an appeals process whereby you can not pay it or pay a reduced amount (basically write and tell them why you think it doesn't apply this year) but you get stung for interest if you get it wrong.

[r0bly0ns]

Or is it 90% of £28825 because of the reasons Hex was talking about - making it £25924

I beleive that this is the correct figure.


But I am not an accountant etc...

[MrRobin]

What is the exact value of the higher rate threshold where you have to pay the extra on divis?

I know the 40% income tax band starts at income over £34600, but do you add the £5225 personal allowance onto this?

So if my ltd pays me a salary of £11k, how much can I take in divi's a year without attracting extra tax?

£34600 + £5225 - £11000 = £28825?

Or is it 90% of £28825 because of the reasons Hex was talking about - making it £25924

[Hex]

Just to clarify, tax on dividends is 10% up to the top of the standard tax band and 32.5% after that.

You're dividend comes with a 10% tax credit that satisfies anything below the higher rate threshold. Above the higher rate threshold you then have to pay 32.5% of the GROSS dividend (i.e. the dividend plus the 10% tax credit). The 10% tax credit reduces this to 22.5%. This 22.5% is the same as 25% of the NET dividend.

So if you pay a dividend of £9,000 then this equates to a GROSS dividend of £10,000 with a Tax Credit of £1,000.

The 10% tax credit satisfies the basic rate tax.

If you are already above the higher rate threshold before receiving this dividend then you owe higher rate tax. If you calculate 32.5% of £10,000 you get £3,250 that you owe. You can subtract the tax credit from this so that means you actually owe £3,250 - £1,000 = £2,250 tax owed.

You can get to this figure much more easily by just taking 25% of the original £9,000 NET dividend you actually paid out. 25% of £9,000 is £2,250.

[r0bly0ns]

With a 10% tax credit cause it's a dividend......

[boredsenseless]

i think you only pay the additional 25% on dividends above the threshhold though, so anything above 39K attracts the additional 25%.

Its 32.5%...

[hgllgh]

So I pay myself the whole amount as a dividend and then pay 25% of it from my personal account when the personal tax return is due?

i think you only pay the additional 25% on dividends above the threshhold though, so anything above 39K attracts the additional 25%.

[VectraMan]

So you don't have to pay until Jan 2009. If you can hold on until April, you won't have to pay until Jan 2010, and it means if things go tits-up for you next year and you don't earn enough, you won't have to pay any tax on that surplus. That's what I'm doing anyway.

[r0bly0ns]

Yep

[stacks]

So I pay myself the whole amount as a dividend and then pay 25% of it from my personal account when the personal tax return is due?

[TheFaQQer]

I've so far kept my salary & dividends to a small amount but I now have surplus cash in the company account that I want to get my hands on. I understand that I can take the rest as a futher dividend but this would mean paying an additional 25% tax as it will take me over the normal tax threshold.

This additional 25% tax - is it classed as further corp tax or as PAYE? Also when/how is it paid, do I just leave the 25% in the comp account and pay it when the bill comes through?

It's neither PAYE nor corporation tax - you pay it, not the company. You need to declare it on your tax return and pay tax on it that way.

[stacks]

I've so far kept my salary & dividends to a small amount but I now have surplus cash in the company account that I want to get my hands on. I understand that I can take the rest as a futher dividend but this would mean paying an additional 25% tax as it will take me over the normal tax threshold.

This additional 25% tax - is it classed as further corp tax or as PAYE? Also when/how is it paid, do I just leave the 25% in the comp account and pay it when the bill comes through?