Reply to: Tax on retained profit

[SueEllen]

Get a good accountant and spend a lot of time understanding this. You are legally responsible for your finances and the mess I am sure they are in.

Why get an accountant when it's cheaper to screw it all up yourself?

[northernladuk]

Get a good accountant and spend a lot of time understanding this. You are legally responsible for your finances and the mess I am sure they are in.

[Craig at Nixon Williams]

- In order to keep CT down, you also then decide to take a dividend for £20K to not exceed the basic rate tax limit)

Thanks

Paying dividends will not reduce your liability to CT - dividends are distributed to the shareholders from the company's retained earnings after corporation tax has been provided for.

Hope this explains!
Craig

[jubilee]

Clare, Craig, Wanderer - thanks very much for the explanation.

[northernladuk]

Kiss ass stuff

Wanderer you do gooder. Only you would be polite to someone that is trolling for giggles.

[Wanderer]

Jubilee, you are (mostly) on the right track. As the others have said, your tax free salary is an expense which reduces your profit. You then pay 20% CT on your profit and what's left can be paid to the shareholders as a dividend with no further tax to pay, provided the shareholders aren't higher rate tax payers.

Be aware that the calculation of the amount of dividend for tax purposes is a bit goofy and the net dividend the shareholder gets paid is not the same as the gross dividend the tax man uses to determine the tax bracket.

Any additional post tax profit can be retained in the company to be paid out in a quiet year or for a capital distribution when you eventually wind up the company.

You definitely need to get in touch with a helpful accountant, or maybe even two.

In an accounting year you make £80K

If your turnover is £80k then it's a false economy not to have one because you can easily make expensive mistakes in your tax planning.

[mudskipper]

There might be a few years waiting period ...

Two of my connections are still connected with him.

[AtW]

As others have said, I think you need an accountant, this guy comes recommended

Darren J Upton | LinkedIn

There might be a few years waiting period ...

[SueEllen]

Current:
Taking a break

A nice long one somewhere crowded with a poor view.

[kingcook]

As others have said, I think you need an accountant, this guy comes recommended

Darren J Upton | LinkedIn

Current:
Taking a break

[SimonMac]

As others have said, I think you need an accountant, this guy comes recommended

Darren J Upton | LinkedIn

[stek]

Please please please please tell me you have an accountant or are just about to get one!!!!

EDIT : Your posting history makes from grim reading. You have had a LTD since 2011 and you have to ask when SA's are due. In 2012 you didn't know the difference between dividends and salary and now you don't even know how to account for dividends. You have got to be a troll, a poor one at that.

...or spent the money!

[northernladuk]

Please please please please tell me you have an accountant or are just about to get one!!!!

EDIT : Your posting history makes from grim reading. You have had a LTD since 2011 and you have to ask when SA's are due. In 2012 you didn't know the difference between dividends and salary and now you don't even know how to account for dividends. You have got to be a troll, a poor one at that.

[Craig@Clarity]

The basic maths behind this is:

Turnover = £80k
Less PAYE (Gross salary) = £7k
Net profit = £73k

CT @ 20% on profit = £14.6k

Retained profits = £58.4k

Retained profits is where you then take divi's from as Clare mentioned.

[Clare@InTouch]

Income tax? No.

CT - yes, on the profit before dividends.