Max dividend calculator

[blacjac]

Unless you have an employment contract in place, then minimum wage applies.

[Alan @ BroomeAffinity]

There is absolutely no need to pay minimum wage as the legislation does not apply to directors. its been covered on this forum about a zillion times.

There is a school of thought that payiong yourself a salary of C£12k pa will keep you under the HMRC radar but that is pure speculation, IMHO.

[Pickle2]

No need to pay yourself minimum wage slackbloke. If thats what your accountant told you was the reason for paying 11k salary, sack him and get another.

You are paying more tax than you are legally obliged to. Of course, it is the position of many a contractor that they are happy to do so for other reasons.

[slackbloke]

Hmmm, am I sure? Well I am as sure as that is what my accountant told me, however, that does not necessarily mean a lot :-)

It was my understanding that there is no legal requirement to pay yourself minimum hourly wage when you are director and employee of your Ltd.
Are you saying that it is and are you sure of this?
Thanks
Oliver

[Olly]

It was my understanding that there is no legal requirement to pay yourself minimum hourly wage when you are director and employee of your Ltd.
Are you saying that it is and are you sure of this?
Thanks
Oliver

[slackbloke]

It has nothing to do with what the job would be 'worth'.
If you work 37 hours a week then at the minimum wage of 5.73 your annual salary would be c£11K. It has nothing to do with whether it will make a tax investigation likely. It does however matter if you are being investigated and you have to explain why you are only working 20 hours a week to make you salary equate the minimum wage but you are billing a client for 37 hours a week.

How are those factors "involved"?
Paying yourself min wage for a job which would normally pay 35 or 45K a year is a lame way to protect yourself...it "might might might" make a tax investigation less likely but there's no way you can argue 10K a year as a fair IT salary, assuming that's what you are proposing.

NI threshold...yes do that...I suppose we all do...6K is above it.

[Olly]

There are other factors involved, like meeting the NI threshold and also appearing to work a proper week, i.e 37 hours X minimum wage.

How are those factors "involved"?
Paying yourself min wage for a job which would normally pay 35 or 45K a year is a lame way to protect yourself...it "might might might" make a tax investigation less likely but there's no way you can argue 10K a year as a fair IT salary, assuming that's what you are proposing.

NI threshold...yes do that...I suppose we all do...6K is above it.

[slackbloke]

There are other factors involved, like meeting the NI threshold and also appearing to work a proper week, i.e 37 hours X minimum wage.

My apology, I was under the misunderstanding that it was £43,800. Not sure where the other £3k came from. If the OP takes a lower PAYE salary, would he be more likely be able to get the most out of his dividend contributions?

[pmeswani]

Its 40,836 (34,800 @ 20%, 6036 free)

So if you knock off your salary of 6000 and interest of 600 you end up with
a GROSS dividend of 34,236 which is a net dividend of (drum roll please) 30,812.

So 30k is not a bad estimate.

My apology, I was under the misunderstanding that it was £43,800. Not sure where the other £3k came from. If the OP takes a lower PAYE salary, would he be more likely be able to get the most out of his dividend contributions?

[Archangel]

You are entitled, if memory serves, to take out £43,800 combined Salary and Dividends before you pay tax on Dividends. However, if you take out £6k in Salary a year, you will be, if I understand it, liable to National Insurance Contributions.

Its 40,836 (34,800 @ 20%, 6036 free)

So if you knock off your salary of 6000 and interest of 600 you end up with
a GROSS dividend of 34,236 which is a net dividend of (drum roll please) 30,812.

So 30k is not a bad estimate.

[Olly]

the accountant I pay monthly for said 30K
....it sounds a bit too much like a round number and perhaps a bit low.

They've made mistakes before that's why I'd like to double check...I'm sure it can't be a difficult calculation, I just don't know what it is

[pmeswani]

Yes, a small amount PAYE and NI.
Please can you explain how that would affect the max dividend possible before paying further tax?

Afraid I can't. I'm not an Accountant or have a full understanding of Taxation. I just accept what my Accountant tells me, and if I feel it is the right judgement, then I go for it. If I don't understand it, I ask them questions. I'm sure someone will point you in the right direction. However, I would suggest speaking to an Accountant, after all they are paid to make sure you are paying yourself the right amount.

[Olly]

Yes, a small amount PAYE and NI.
Please can you explain how that would affect the max dividend possible before paying further tax?

[pmeswani]

Hi there, please does anyone have a formula / link / ssheet to calculate the max dividend that can be withdrawn from my Ltd without paying additional tax.

I take 6K gross salary and expect £600 in gross interest payments, no other income.

Is 30K dividend right? Thanks

You are entitled, if memory serves, to take out £43,800 combined Salary and Dividends before you pay tax on Dividends. However, if you take out £6k in Salary a year, you will be, if I understand it, liable to National Insurance Contributions.

[Olly]

Hi there, please does anyone have a formula / link / ssheet to calculate the max dividend that can be withdrawn from my Ltd without paying additional tax.

I take 6K gross salary and expect £600 in gross interest payments, no other income.

Is 30K dividend right? Thanks