Reply to: Money i can pay myself

[Joxer]

If you dont pay any more salary to yourself from ltd, then you might be in for a tax/ni refund as well.

I am in a similar position to the original poster (...having been paid ~£20k in salary in this tax year from my perm role).

Could you provide a bit more detail on this potential Tax/NI refund?

Many Thanks.

[diesel]

I assume the interest is gross. I also assume the pension contributions are gross and are personal contributions, ie not paid by your company.

Effectively you start with £47,923 less the salary (£5,720) and interest (£3,100) leaves £39,103 as the gross dividend.

The net dividend is 90% of this which equals £35,193, this is the cash dividend you can take.

Alan

Thanks for the info
Yes personal pension payments is what is deducted from my accounts. Interest is gross.

Northernladuk - i do have an accountant. But unless i made an error in understanding accountant calcs it different from using the SJD free divi planner - hence wanted some clarification. Normally earning above higher tax bracket was not a prob for me over the past 2 years but this year has been fruitful, i want to avoid higher tax bracket if poss for now.

[northernladuk]

Why not get an accountant? Might cost you but could potentially save you the same ammount by stopping u messing up?

[Nixon Williams]

Wish tax was less taxing

More i read these posts i get more confused, unless i am really getting grey matter.

The simple calc given by my accountant is out by about £500 from using the free one from SJD website for dividend planning.
my income details are:
Personal Allowance 6,475.00
20% Tax Bracket 37,400.00
Pension Contribution 4,048.67
Earnings before 40% tax 47,923.67

Salary for Year 5,720.00

Other interest from bank interest etc is approx £3100 for the year.

So how much in dividends can i take with and without the 10% tax?

thank you

I assume the interest is gross. I also assume the pension contributions are gross and are personal contributions, ie not paid by your company.

Effectively you start with £47,923 less the salary (£5,720) and interest (£3,100) leaves £39,103 as the gross dividend.

The net dividend is 90% of this which equals £35,193, this is the cash dividend you can take.

Alan

[diesel]

Wish tax was less taxing

More i read these posts i get more confused, unless i am really getting grey matter.

The simple calc given by my accountant is out by about £500 from using the free one from SJD website for dividend planning.
my income details are:
Personal Allowance 6,475.00
20% Tax Bracket 37,400.00
Pension Contribution 4,048.67
Earnings before 40% tax 47,923.67

Salary for Year 5,720.00

Other interest from bank interest etc is approx £3100 for the year.

So how much in dividends can i take with and without the 10% tax?

thank you

[Clare@InTouch]

You can pay your CT early and get interest paid on it by HMRC. I don't know what the current rates are...

0.5% - better than most banks though!

HM Revenue & Customs: Interest rate on repayments

[ratewhore]

(now i need to figure out what to do with the surplus ££ in my Ltd Company - a nice problem for a change!)

You can pay your CT early and get interest paid on it by HMRC. I don't know what the current rates are...

[diesel]

Yes - as per my original post the higher rate is 32.5%, but with the 10% tax credit it takes it to 22.5% of the gross (which equates to 25% of the net).

CT will be paid on profit regardless of whether you withdraw the dividends or not, but you shouldn't forget that you will have that to pay in addition to any personal tax. Sometimes people think the two are the same thing, and have something of a shock when they find out they aren't!

Thanks for the replies Clare.

(now i need to figure out what to do with the surplus ££ in my Ltd Company - a nice problem for a change!)

[Clare@InTouch]

thanks for the information.
But from the dividend calulator posted by ratehwhore it states this:
Dividends are taxed at the higher rate of 32.5% for income up to £150,000 and at the additional rate of 42.5% thereafter. The first 10% is already paid via a tax credit.

i notice these rates are 10% higher, is this due to the notional 10% tax?

Just1morethen - sorry for sounding but how does the 21% corp tax affect divis? As my accountants works out corp tax due each month based on my monthly fee income, so this has to be paid regardless.

Yes - as per my original post the higher rate is 32.5%, but with the 10% tax credit it takes it to 22.5% of the gross (which equates to 25% of the net).

CT will be paid on profit regardless of whether you withdraw the dividends or not, but you shouldn't forget that you will have that to pay in addition to any personal tax. Sometimes people think the two are the same thing, and have something of a shock when they find out they aren't!

[diesel]

It would be £47,923.67 less £5,720 = £42,203.

The dividends then need to be netted down - £42,203 divided by 10 x 9 = £37,982. The £37,982 is the amount you can actually take, and it will show as £42,203 on your tax return (with tax paid of the 10%).

If you take £38,982 you can expect a tax bill of £250.

thanks for the information.
But from the dividend calulator posted by ratehwhore it states this:
Dividends are taxed at the higher rate of 32.5% for income up to £150,000 and at the additional rate of 42.5% thereafter. The first 10% is already paid via a tax credit.

i notice these rates are 10% higher, is this due to the notional 10% tax?

Just1morethen - sorry for sounding but how does the 21% corp tax affect divis? As my accountants works out corp tax due each month based on my monthly fee income, so this has to be paid regardless.

[rd409]

And I had though that I had it figured out!
Now I am a bit confused too.
Given the fact that in the past tax year I have been working as a salaried employee, I can't really take advantage of the 6,475.00 tax-free amount (my salary from non-Ltd has already used it up).
In total I have earned ca 18k on a salary.
I suppose the I can only pay myself ca 20k of dividends before I hit the higher tax bracket, right?

If you dont pay any more salary to yourself from ltd, then you might be in for a tax/ni refund as well.

[xchaotic]

And I had though that I had it figured out!
Now I am a bit confused too.
Given the fact that in the past tax year I have been working as a salaried employee, I can't really take advantage of the 6,475.00 tax-free amount (my salary from non-Ltd has already used it up).
In total I have earned ca 18k on a salary.
I suppose the I can only pay myself ca 20k of dividends before I hit the higher tax bracket, right?

[ratewhore]

This is sometimes useful:

HTH.

[Alan @ BroomeAffinity]

But bear in mind the divis are paid out of retained profits which will already have been taxed at 21% which has a bearing on things.

[Clare@InTouch]

Thanks for the quick reply, makes its a bit more clearer. However, from what i understand you are saying is that dividends paid over the higher tax band are not subject to the 40% tax level, and only to 25% from net amount?

So i can pay myself
Personal Allowance 6,475.00
20% Tax Bracket 37,400.00
Pension Contribution 4,048.67
Earnings before 40% tax 47,923.67

minus
salary of 5,720 for the year.
Does this mean i can stil pay myself as dividends an amount of £42,216 including the 10% notional tax for the year? (but still need to account for bank interest etc.)
dividends above this amount are only subject to 25% tax in my self assessment?

thanks again

It would be £47,923.67 less £5,720 = £42,203.

The dividends then need to be netted down - £42,203 divided by 10 x 9 = £37,982. The £37,982 is the amount you can actually take, and it will show as £42,203 on your tax return (with tax paid of the 10%).

If you take £38,982 you can expect a tax bill of £250.