Lots of reading has confused me.. help with basics

[EvilWeevil]

Your accountant should help you - I am assuming you have one?

Have you seen any evidence to support this assumption?

[slackbloke]

The above isn't normally the case though is it?

anyway, with the above in mind, does it basically work out as follows:

2008-2009

Money from employment (Gross) = 6,035
LESS Personal allowance = 6,035-6,035=0
Total (non-savings) income = 0
Dividends (gross) = 40,835-6035= 34,800*
Gross income = 40,835

* as I understand it, the gross dividend is what is paid?

Thanks.

No, the amount you have calculated for dividends to keep you believe the 40% threshold needs to include the notional tax. So you would pay yourself :

34,800 less 10%, i.e. 31320

that is a dividend of 31320

Tax credit of 3480 (31320/9)

The dividend + tax credit is used for self-assessment income purposes

[dmini]

No the gross dividend is not what is paid. You have paid a notional 10%tax on your divis - which you never see. like with salary
Gross divi-tax=bit you get in your sticky mitts
Gross dividend must be used in calculations.

The basic rate band ALWAYS runs from the point you pay your first bit of tax. So it finishes at whatever the tax free allowance for yourself is +basic rate band.
You need to understand these basics quickly. they are important. Your accountant should help you - I am assuming you have one? As these are the real basics - it can get a lot mor complicated after this I would suggest you do - quickly

[RockyBalboa]

This basic rate is exclusive of the allowance, so you can earn up to £40,835 before entering the higher rate band.

The above isn't normally the case though is it?

anyway, with the above in mind, does it basically work out as follows:

2008-2009

Money from employment (Gross) = 6,035
LESS Personal allowance = 6,035-6,035=0
Total (non-savings) income = 0
Dividends (gross) = 40,835-6035= 34,800*
Gross income = 40,835

* as I understand it, the gross dividend is what is paid?

Thanks.

[Cheshire Cat]

Is that just for this year 2008-2009?

Yep, typically the rate thresholds shift from year to year.
And occasionally the treasury invent some kooky sh!t like this 10% game just to keep everyone interested.

[RockyBalboa]

This basic rate is exclusive of the allowance, so you can earn up to £40,835 before entering the higher rate band.

Is that just for this year 2008-2009?

[KevinS]

It's being changed half-way through the fiscal year??

Yes, because of the fall out of dropping the 10% tax band, Darling had to backtrack to appease the great unwashed..

EDIT: It is being backdated to April 6th, though..

[RockyBalboa]

No.

It is, at the moment, but in the autumn, the personal allowance will go up to £6,035. And the basic rate allowance will be reduced to £34,800.

This basic rate is exclusive of the allowance, so you can earn up to £40,835 before entering the higher rate band.

It's being changed half-way through the fiscal year??

[Cheshire Cat]

My accountants have advised me that with a salary of, say, £10k, I would be able to pay dividends up to a further £30,800 ish (taking total income to ~£40.5k) before paying "higher rate" tax.
My salary would be PAYE, so I would receive ~ £9080 of the £10k salary net of income tax and NI.
The dividends of ~£30k would be declared with a "notional" tax credit of ~ £3,333, so the 10% personal tax that I would otherwise have to pay to HMRC has, for all intents and purposes, been netted out by this credit.
i.e. I get to keep ALL of the ~ £30k divs to spend on coke and hookers etc

If my company issues further dividends in this tax year, I will be liable for 22.5% personal tax on that, so another £10k div would earn me ~£7750 net.

Remember, ANY dividend you pay will be from company PROFITS, so AFTER your CT liability has been placed to one side, to pay HMRC later.

[EvilWeevil]

So is this correct:

Money from employment (Gross) = 5,435
LESS Personal allowance = 5,435-5,435=0
Total (non-savings) income = 0
Dividends (net) = 36,000-5,435 = 30,565
Statutory Total Income = 36,000

?

Thanks.

No.

It is, at the moment, but in the autumn, the personal allowance will go up to £6,035. And the basic rate allowance will be reduced to £34,800.

This basic rate is exclusive of the allowance, so you can earn up to £40,835 before entering the higher rate band.

[VectraMan]

Probably. The complicated bit is that you need to allow for the 10% dividend tax credit.

[RockyBalboa]

So is this correct:

Money from employment (Gross) = 5,435
LESS Personal allowance = 5,435-5,435=0
Total (non-savings) income = 0
Dividends (net) = 36,000-5,435 = 30,565
Statutory Total Income = 36,000

?

Thanks.

[VectraMan]

1. a salary of of up to 36,000 and get taxed 20% on the salary with a dividend of 34,600???

Salary and dividends are not independent. If you do the above, your dividends will be taxed at the higher rate because you've exceeded the threshold. It works salary, then dividends, then savings.

[RockyBalboa]

Hi

Have read lots on this forum and was initially quite clear but now have become a bit muddled with the division of income and tax brackets as follows.

'Savings income' aside for a moment, I understand that for 2008-2009:

1. Personal allowance is: 5,435
2. Basic rate income tax (20%) is: 0-36,000
3. Dividend rate for basic rate (above) is: 10% on a maximum of £34,600

Now, initially, where I am getting confused is the overall taxable income. I have read that it excludes dividends so does this mean that I can pay myself:

1. a salary of of up to 36,000 and get taxed 20% on the salary with a dividend of 34,600???

OR

2. my overall taxable income includes the salary and dividend?


OR

It works in a totally different way to the above???

Thanks for your help.