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Previously on "Dividends..how much and implications?"

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  • shoes
    replied
    Originally posted by Mustang View Post
    What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.
    But, as previously suggested, a 6k salary and the rest divis says to the IR come get it big boy do ya feel lucky punk. Or in other words, suggests you are confident of your ir35 status and so are not rich pickings for IR.

    And who is actually drawing enough in salary to meet their outgoings? The people paying national min wage or just over certainly aren't, so what's the point of paying that extra tax? To an investigator that might say 'im not all that confident of my position so im just playing it safe', indicating there might be some in ir35 contracts there. And to those paying themselves 50k salary or whatever, you might as well go brolly in most cases.

    All or nothing, 6k and divis, up yours hector.

    Leave a comment:


  • ASB
    replied
    Originally posted by Mustang View Post
    What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.
    It may well make you more likely to be investigated, but there not a damn thing HMRC can do about it - though when I had my investigation the inspector wanted to make absolutely sure all the paperwork for the divis was in order.

    Leave a comment:


  • Mustang
    replied
    What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.

    Leave a comment:


  • ASB
    replied
    Originally posted by zamzummim View Post
    Yes I had extra income / salary from somehwere else.
    Then yes, in those circumstance dividends only in the most tax efficient way.

    Leave a comment:


  • zamzummim
    replied
    Originally posted by ASB View Post
    Unless you have salary from somewhere else that advice is, in my view, cack because:-

    - you won't get a years pension credit
    - you will pay about 1200 more in tax.
    Yes I had extra income / salary from somehwere else.

    Leave a comment:


  • ASB
    replied
    Originally posted by EchoSierra View Post
    Yeah, I've heard that as well but its not very tax efficient. You've got a Personal Allowance of £6,475 in the 09/10 tax year which means you pay zero tax on that so why would you have that as a div and pay 21% CT on it?

    As I said, I've heard of people doing this, but don't understand the logic behind it... Yes, there is NI on £6475 but its 83.60 and Employers NI is £97.28 so much less than £1359.75 CT you'd pay on £6475.
    You can avoid the NI althougther and get a pension credit by paying between the lower earnhigs limit and the primary threshold. I can't be bothered to work out where the crossover point is for the absolute most tax efficient but I'd be surprised if it was more then the LEL.

    Leave a comment:


  • ASB
    replied
    Originally posted by zamzummim View Post
    My accountant suggested no salary, just divs, anyone else is just paying themselves divs?
    Unless you have salary from somewhere else that advice is, in my view, cack because:-

    - you won't get a years pension credit
    - you will pay about 1200 more in tax.

    Leave a comment:


  • EchoSierra
    replied
    Originally posted by zamzummim View Post
    My accountant suggested no salary, just divs, anyone else is just paying themselves divs?
    Yeah, I've heard that as well but its not very tax efficient. You've got a Personal Allowance of £6,475 in the 09/10 tax year which means you pay zero tax on that so why would you have that as a div and pay 21% CT on it?

    As I said, I've heard of people doing this, but don't understand the logic behind it... Yes, there is NI on £6475 but its 83.60 and Employers NI is £97.28 so much less than £1359.75 CT you'd pay on £6475.

    Leave a comment:


  • Pickle2
    replied
    Originally posted by helen7 View Post
    yes that is fine if you want to point a big arrow at yourself asking for an ir35 investigation.
    Doesnt paying NMW make you stand out even more as someone who is worried about an IR35 investigation (and therefore the exact sort of business Hector should be looking at)? Every real small business goes down the low salary and divis route, so by doing anything different you are flagging yourself up for an investigation.

    Leave a comment:


  • zamzummim
    replied
    My accountant suggested no salary, just divs, anyone else is just paying themselves divs?

    Leave a comment:


  • mossman
    replied
    Salary

    The salary figure I gave was just an example, not a suggestion. My accountant has me paying myself about the minimum wage, but I wouldn't know the implications of not doing this. Perhaps, as someone suggested, it might bring unwanted attention.

    Leave a comment:


  • Platypus
    replied
    Originally posted by helen7 View Post
    yes that is fine if you want to point a big arrow at yourself asking for an ir35 investigation.
    It's my understanding that there's no evidence that this is the case.

    Anyone know differently?

    Leave a comment:


  • helen7
    replied
    Originally posted by shoes View Post
    Why that particular salary figure?

    Isn't something around the 6k mark more tax efficient?
    yes that is fine if you want to point a big arrow at yourself asking for an ir35 investigation.

    Leave a comment:


  • shoes
    replied
    Why that particular salary figure?

    Isn't something around the 6k mark more tax efficient?

    Leave a comment:


  • mossman
    replied
    Dividends

    I am not an accountant. You should always check with your accountant on these matters. Anyone else can feel free to correct me, but here's my understanding based on 10 years contracting.

    1 You can pay a dividend whenever you like. You might want to avoid paying one every month because it looks a bit like a salary. You have to complete some documentation relating to the dividend - your accountant should be able to provide a template for you.

    2 If you are the sole shareholder, the whole of the net dividend will come to you.

    3 The company must have made that much profit for you to pay it out as a dividend. Don't anticipate profit, in case it doesn't happen. Profit is takings minus outgoings (outgoings includes everything that the company pays out, including your salary, but not dividends). Don't forget that some of the money in the co. bank account will be VAT that is not yours but payable to HMRC at the end of the quarter. You will want to leave enough in your co. account to cover cheques not yet cashed, your accountant's standing order (if applicable) and probably next month's salary and expenses. Also anything that has been set up to go from the account but hasn't come out yet e.g. last month's VAT payment to HMRC.

    4 If you want to avoid paying higher rate tax, you will want to make sure your total personal income for the tax year does not exceed the limit for standard rate tax, which for 2009/10 is £41,075. This means that your gross salary plus gross dividend plus any other income e.g. property rental income, bank interest, income from a permie job in the same tax year must be within that limit.

    So if you are paying yourself a salary of £11,075, and you have absolutely no other income in the tax year, then you can pay yourself total dividends of £30,000 in the tax year without paying higher rate tax. That's a gross dividend. I believe you still have to allow a notional 10% tax, so that what you can pay yourself is actually £27,000 net. (someone please correct me if I am wrong).

    5 Don't forget corporation tax (currently 21% on profits up to £300,000 I believe). So if you had made £10,000 profit, your CT liability at the end of the year would be £2,100, so the amount available as a net dividend is £7,900.

    Hope that helps.
    Last edited by mossman; 12 May 2009, 15:32.

    Leave a comment:

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