Reply to: Ever not taken your full dividend allowance?

[Gittins Gal]

Aimed at Gittins Girl who was seeming to imply she struggles even on dividends up to the basic threshold which, with a tax efficient salary is approx £3100 a month.

*just saw the typo in my post, which should have said "monk"

Yes, *I'd struggle on that.

Got my country pile to maintain, fuel in the Range Rover, yacht mooring fees, holidays... The list goes on.

I enjoy my creature comforts. Don't particularly want to cycle everywhere and live on a bowl of rice a day.

[darrylmg]

I haven't taken my full divi allowance last year.
I was putting some aside in the company to pay for training and didn't know how much i needed exactly. Plus, I don't need to take my full allowance to pay for my life. Since I can issue a divi anytime and you don't get any interest on savings anywhere, I decided to leave it in the company.
At some point I would like to expand and employ a junior to learn the ropes and then go off and earn me some wedge...

[TheCyclingProgrammer]

Eh?

Aimed at Gittins Girl who was seeming to imply she struggles even on dividends up to the basic threshold which, with a tax efficient salary is approx £3100 a month.

*just saw the typo in my post, which should have said "monk"

[northernladuk]

£3100 per month net take home is hardly living the life of a month is it?

Eh?

[northernladuk]

Thanks to all who replied, most of any divi's usually go into ISA's or more likely these days in paying off the mortgage anyway it's not like I'm going to spend them on dancing girls, drugs and champagne........the wife for some reason frowned at that idea.

Yeah because she was planning on doing the same!

[TheCyclingProgrammer]

£3100 per month net take home is hardly "living the life of a monk" is it?

[Gittins Gal]

No, I've never done this.

Do you live the life of a monk or something? I really struggle to not go so far over the threshold that I have to make payments on account the following year.

And all that with my being quite creative with expenses

I must be a feckless spendthrift!

[TheCyclingProgrammer]

I've fallen a little short before, but generally take most of it. I take fixed quarterly dividends of £7500, so I'll be declaring a final dividend of about £300 or thereabouts at the end of March.

I may have missed out in earlier years were my dividends were a bit, haphazard and irregular. I was taking about the bare minimum we needed to live in order to build up a healthy retained profit (war chest) for the first few years. Taking regular, fixed amounts makes personal budgeting a lot easier though.

[Murder1]

Thanks to all who replied, most of any divi's usually go into ISA's or more likely these days in paying off the mortgage anyway it's not like I'm going to spend them on dancing girls, drugs and champagne........the wife for some reason frowned at that idea.

[Lloyd1981]

Whichever way....I decided to take the full amount of dividends last year....only to realise a few weeks ago that my Self Assessment payment was through the roof.

Gotta love being over the higher-rate tax threshold (Spew).....

Personally I'd leave it in the Business account for the Warchest and anytime on the bench!

[philip@wellwoodhoyle]

There can sometimes be consequences for taking out the maximum amount, in terms of leaving your company balance sheet looking light. We've had a few cases where the company has been credit checked for a mobile phone or utility contract and been rejected because the net reserves have fallen from previous years or where they're very low. Given that the Co House balance sheets shows no details of profits nor dividends, it gives the impression of a loss making company, hence a lower credit rating. It's certainly something we throw into the mix when discussing dividends with clients just so that they're aware of a potential pitfall if they were thinking of entering into credit/contracts etc.

[Murder1]

If you take a basic rate dividend then it's effectively tax free, so you'd have to compare the benefits of investing through the company or investing personally.

For example say you could withdraw enough in basic rate dividends over the course of a few years to buy a house outright. Or you could leave the money in the company and buy the house through the company instead. Which is better? It depends. If it's your only house and you intend to live in it then you're better off buying personally as there would be no tax on sale and having it through the company would be a benefit in kind. If it's an investment property then maybe you want it in the company as CT on sale is 20% vs CGT personally which could be 28%. It's something you'd have to think through and plan ahead for.

Much appreciate Clare, duly noted.

[Clare@InTouch]

I'm trying to jump between the director chair and the employee chair and see if there's any business benefit in the money remaining where it is - investment / property / buffer to pay sub contractors etc

If you take a basic rate dividend then it's effectively tax free, so you'd have to compare the benefits of investing through the company or investing personally.

For example say you could withdraw enough in basic rate dividends over the course of a few years to buy a house outright. Or you could leave the money in the company and buy the house through the company instead. Which is better? It depends. If it's your only house and you intend to live in it then you're better off buying personally as there would be no tax on sale and having it through the company would be a benefit in kind. If it's an investment property then maybe you want it in the company as CT on sale is 20% vs CGT personally which could be 28%. It's something you'd have to think through and plan ahead for.

[Murder1]

I normally have a few £k left, just in case I've buggered something up that would push me over.

Still managed to bugger up last year

I've always done that. Between myself and the account we're forever rounding down so as to not go over any limit.

[DirtyDog]

Ready to be laughed off the face of the earth, but has anyone ever not taken their full dividend allowance (up to the higher tax rate) even if sufficient funds exist in the business?

I normally have a few £k left, just in case I've buggered something up that would push me over.

Still managed to bugger up last year