Reply to: Salary v dividends

[DimPrawn]

They did not train me to behave, they trained me to sit on the sofa in my bedsit and have a Pot Noodle...

FTFY

[MarillionFan]

They did not train me to behave, they trained me to sit on the sofa in my bedsit and eat crisps....

Ftfy

[AtW]

Was this how they trained you in Moscow to behave with 007 ?

They did not train me to behave, they trained me to kill...

[FatLazyContractor]

That's what General has always been

Was this how they trained you in Moscow to behave with 007 ?

[FatLazyContractor]

Whoa, calm down guys. You're turning this into mumsnet for contractors. To the OP, SimonMac & Vectra have given you the correct answers. Hope your don't get turned away from the forum because of the tone of others

What I don't get is for the CUK regulars is if it feels like a repeat question, why not just ignore it ?

I understand your pain. These people like AtW etc are winkers of the highest order.

I'd suggest that you PM those sane posters like NorthernladUK or MarillionFan. They do have a lot of experience in such matters.

Hope that helps

[AtW]

Whoa, calm down guys. You're turning this into mumsnet for contractors.

That's what General has always been

[jbond007]

Whoa, calm down guys. You're turning this into mumsnet for contractors. To the OP, SimonMac & Vectra have given you the correct answers. Hope your don't get turned away from the forum because of the tone of others

What I don't get is for the CUK regulars is if it feels like a repeat question, why not just ignore it ?

[VectraMan]

Calm down everybody. He was just asking how the allowances work.

Example 3
“I have a non-dividend income of £6,500, and a dividend income of £12,000 from shares outside of an ISA”

With a Personal Allowance of £11,000, £4,500 of the dividends are under the threshold for tax. A further £5,000 comes within the Dividend Allowance, leaving tax to pay at Basic Rate (7.5%) on £2,500.

https://www.gov.uk/government/public...ance-factsheet

Unless I'm very much mistaken that makes the answer YES.

Though you're still better off not doing it that way because of CT.

[SimonMac]

In the new tax year starting April 2016, the personal allowance goes up to £11,000,meaning anything earned up to the amount is exempt from Income Tax.

Also from April 2016, the first £5,000 of dividends is free of any tax.

If I choose NOT to take a salary, can that £11,000 be regarded as an additional tax free dividend, ie can I take a total of £5,000 + £11,000 = £16,000 as dividends and not pay any tax on it?

What ever salary you take will reduce your Corp Tax bill (if you don't pay CT then there is nothing wrong with your plan)

[DannyF1966]

If I choose NOT to take a salary, can that £11,000 be regarded as an additional tax free dividend, ie can I take a total of £5,000 + £11,000 = £16,000 as dividends and not pay any tax on it?

If you think it's a good idea, then you should go for it and see what happens. You never know, you might be able to sneak it in under HMRC's radar, because as we all know, they only bother about the big fish and leave us tiddlers alone to do as we please. Keep us posted though, we could all do with a good laugh occasionally.

[ContractorHardman]

In the new tax year starting April 2016, the personal allowance goes up to £11,000,meaning anything earned up to the amount is exempt from Income Tax.

Also from April 2016, the first £5,000 of dividends is free of any tax.

If I choose NOT to take a salary, can that £11,000 be regarded as an additional tax free dividend, ie can I take a total of £5,000 + £11,000 = £16,000 as dividends and not pay any tax on it?

So, let me get this straight... you dont want to pay a salary at all and just use free Dividends? You are the reason George Osborne comes after us. I'm sorry if this is harsh but deary me! I don't know what is more worrying, the logic behind the idea, the lack of knowledge behind the idea, asking the Internet for justification of the logic or the fact someone actually hires you for a lot of money per day.

Please ask your accountant. ..if you have one. If not, I seriously you hire one NOW! Plus I would also read up on IR35.

Sorry if this is harsh but you need some reality

[AtW]

The changes the government is making in terms of small businesses are easy to understand even more so if you have an accountant to help you.

The changes they make are indeed easy to undestand - shafting small business. The details need to be checked with an accountant, but it's going to be pretty big shafting from April.

[SueEllen]

Govt is making too many changes too fast and saying publicly things that are clearly designed to mislead people, ie: 3% extra stamp duty to stop dirty BTLers (real life: will apply to everybody who got more than 1 house owned at the time of completion), or £5k tax free dividends - lovely, but not really (as I understand) if somebody earns enough - that would be still taxed.

Nope.

The changes the government is making in terms of small businesses are easy to understand even more so if you have an accountant to help you.

[AtW]

Govt is making too many changes too fast and saying publicly things that are clearly designed to mislead people, ie: 3% extra stamp duty to stop dirty BTLers (real life: will apply to everybody who got more than 1 house owned at the time of completion), or £5k tax free dividends - lovely, but not really (as I understand) if somebody earns enough - that would be still taxed.

[SueEllen]

I can't believe the number of threads with basic questions like this. I guess there are going to be plenty more before April.

I just don't get why people don't speak to their accountants first or are they on here because they don't have accountants??

Oh it's in General. That's not so bad then.

Remember some people simply refuse to understand their finances while others refuse to and others can't.