Reply to: Drawing dividends over higher tax threshold - should I?

[MrRobin]

Income under 40% tax threshold is quite a lot to be honest. Even if you are the single shareholder it equates to something around 3500 a month plus expenses. That kind of income is definitely livable even in London imho.

Exactly. Equivalent permie salary is £62k so way higher than average.

I would suggest, smalldog, you could examine your outgoings to see where efficiencies can be made... you might find you can save a packet!

[rd409]

Granted you can Im sure but does depend on your lifestyle choice and commitments. I can see that is more doable if you have a teeny tiny mortgage.

Im seriously impressed if you can live off that in a year taking into account things like mortgages, cars, holidays, kids or maintenance, home improvements and unexpected things like stuff breaking...oh and of course Hector asking you to make SA payments on accounts every 6 months, granted lot less if your under the 40% threshold. Guess I just need to try and clear my debts quicker so I can at least try and get under it at some point in my life...

Well honestly, the ltd company has 2 share holders me and my wife. So we can really afford to take quite substantial amount out of the ltd, and still stay under the 40% mark. Also, if I were the only shareholder, then a permie would have to earn a salary of 61k to get the same amount of cash in hand after the tax and NI deductions. So the comparable figure should be 61k for the lifestyle. As i said, that is a very good figure if you consider, the number of people who earn quite lot less than that in a permie salary.

[TheFaQQer]

Granted you can Im sure but does depend on your lifestyle choice and commitments. I can see that is more doable if you have a teeny tiny mortgage.

Im seriously impressed if you can live off that in a year taking into account things like mortgages, cars, holidays, kids or maintenance, home improvements and unexpected things like stuff breaking...oh and of course Hector asking you to make SA payments on accounts every 6 months, granted lot less if your under the 40% threshold. Guess I just need to try and clear my debts quicker so I can at least try and get under it at some point in my life...

Well, you don't have to pay SA payments on account - I pay no income tax at all.

OK, white lie - this year, it was £10.18 I had to pay.

[smalldog]

Income under 40% tax threshold is quite a lot to be honest. Even if you are the single shareholder it equates to something around 3500 a month plus expenses. That kind of income is definitely livable even in London imho.

There are plenty of people living more than happily on that kind of salary and even paying tax and NI on top of it.

Granted you can Im sure but does depend on your lifestyle choice and commitments. I can see that is more doable if you have a teeny tiny mortgage.

Im seriously impressed if you can live off that in a year taking into account things like mortgages, cars, holidays, kids or maintenance, home improvements and unexpected things like stuff breaking...oh and of course Hector asking you to make SA payments on accounts every 6 months, granted lot less if your under the 40% threshold. Guess I just need to try and clear my debts quicker so I can at least try and get under it at some point in my life...

[TheFaQQer]

Im always staggered when I hear people surviving under the 40% tax threshold, you living in a cave and driving an old skoda or something?? How on earth......

Have you done the sums? It is hardly being on the breadline particularly if you partner works or is a shareholder as well.

WHS - although my wife isn't a shareholder or a worker.

[psychocandy]

Nope. I live up north. Where they don't charge to drive on roads, and i can buy a 4 bed detached house on a nice estate for £250,000.

Down south, you'd only get a bedsit for that!

Cheaper than that in Wales....

[kingcook]

Im always staggered when I hear people surviving under the 40% tax threshold, you living in a cave and driving an old skoda or something?? How on earth......

Nope. I live up north. Where they don't charge to drive on roads, and i can buy a 4 bed detached house on a nice estate for £250,000.

Down south, you'd only get a bedsit for that!

[rd409]

Im always staggered when I hear people surviving under the 40% tax threshold, you living in a cave and driving an old skoda or something?? How on earth......

Income under 40% tax threshold is quite a lot to be honest. Even if you are the single shareholder it equates to something around 3500 a month plus expenses. That kind of income is definitely livable even in London imho.

There are plenty of people living more than happily on that kind of salary and even paying tax and NI on top of it.

[northernladuk]

Im always staggered when I hear people surviving under the 40% tax threshold, you living in a cave and driving an old skoda or something?? How on earth......

Have you done the sums? It is hardly being on the breadline particularly if you partner works or is a shareholder as well.

[smalldog]

As a clarification, I was merely answering the question - I don't invest in any of them. I don't take dividends that would put me over the 40% threshold either.

Im always staggered when I hear people surviving under the 40% tax threshold, you living in a cave and driving an old skoda or something?? How on earth......

[northernladuk]

As a clarification, I was merely answering the question - I don't invest in any of them. I don't take dividends that would put me over the 40% threshold either.

Yeah I understand. Wasn't picking on your post in general, just it was the cleanest one to link to. Was a question to all discussing these types of accounts. I guess even taxed it is still profit over and above what you would get sitting there at 0.5% or whatever, particularly if you have a tidy sum.

[TheFaQQer]

Sorry for quoting your example TF but to you guys investing in these you are taxed on the interest and then taxed when you divi it out to yourself yes? so doesn't leave much on a few percent unless you have a lot in the co? Am still crossing my fingers someone will come up with something worthwhile no one has spotted yet.

As a clarification, I was merely answering the question - I don't invest in any of them. I don't take dividends that would put me over the 40% threshold either.

[psychocandy]

Sorry for quoting your example TF but to you guys investing in these you are taxed on the interest and then taxed when you divi it out to yourself yes? so doesn't leave much on a few percent unless you have a lot in the co? Am still crossing my fingers someone will come up with something worthwhile no one has spotted yet.

Hmmm. good point. Doesnt leave a lot....

[Ruprect]

I've invested in a few VCTs. Baronsmead and Close Bros have performed better than most.

[northernladuk]

3.1% (Shawbrook - 1 Year Fixed Rate Business Savings Bond - Issue 1) - £5k
3% (Santander - 1 Year Fixed Rate Business Bond). - £25k
2.9% (Shawbrook - 100 Day Notice Business Savings Account - Issue 2). - £5k
1.5% (Saffron BS - Business e-saver, instant access, £1,000 or over) - £1k

Sorry for quoting your example TF but to you guys investing in these you are taxed on the interest and then taxed when you divi it out to yourself yes? so doesn't leave much on a few percent unless you have a lot in the co? Am still crossing my fingers someone will come up with something worthwhile no one has spotted yet.