Dividends logic

[blacjac]

The 10% tax credit on dividends can be tricky to get your head round at first.

basically, if you recieve £100 in dividends, you will get a voucher from your company showing £110, with 10% tax.
You don't actually have to pay this tax to anyone as it is credited back to you because the company has already paid corp tax on the profits (which is where the 'credit' comes in).

So your gross dividend (which is used to calculate your tax bracket etc..) is £110, but the money you actually recieve from the company (net dividend) is £100.

[nomadicguy]

I'm actually trying to understand a XLS the Accountants provided, and wanted assurance that my understanding was correct. 20% CIT is already paid, so if Personal Allowances are available, it seemed 'at worst' a 10% extra to pay....then the XLS shows a write-back of this 10/90 'Tax Credit' - only referenced with regards to Dividend Payments.

[Integrity]

Newbie 1st question !

Question: assuming no other income from Savings, etc......iif Balance Sheet of our UK Ltd Co has c100k accumulated profit, then the Mrs and I can take Dividends with approx. the following logic:

35k each Dividend, with 0% on 1st 5435, then 10% to pay on next 36k (and some confusing computation regarding a Tax Credit).....but in essence, we can pay c500 quid tax each for 34,500 each net cash in our pocket ?

Agreed ?

No. Tax & Tax Credits are two separate things when it comes to how much tax you need to pay. Your calculations are wrong and will result in you taking out too much money. You should speak to an accountant.

[TheBigYinJames]

Newbie 1st question !
Agreed ?

Free advice is worth every penny.

[nomadicguy]

Newbie 1st question !

Question: assuming no other income from Savings, etc......if Balance Sheet of our UK Ltd Co has 70k accumulated profit (already taxed), then the Mrs and I can take Dividends with approx. the following logic:

35k each Dividend, with 0% on 1st 5435, then 10% to pay on the rest (as below 36k threshold) less a Re-credit amount based on 10/90 logic.....but in essence, we can pay (it seems) 500 quid tax each for 34,500 each net cash in our pocket ?

Agreed ?