Reply to: Rich/Tight contractors?

[SueEllen]

My understanding of the tax system, from years of Money Box on radio, is that dividends can be really flexible in terms of when they arrive (monthly, bi/tri, 6 or 12 months etc.) however the tax implications can change.

For example a monthly dividend could be treated as a standard income when being assessed, quarterly is an option if you prefer near-constant payments and is more business like but still a compromise. Yearly dividends are the most popular and you'll find that it's used on most type B shares.

Now things get interesting if you are a listed company, in that the business can 'own' its own shares and not have to pay a dividend to itself (that would be odd) but to shareholders yes. I think small enterprises can claim EIS tax relief so investors don't have to pay income tax on those dividends.

That's all I really know, it depends on how you want your self-assessments to look if other people glance at it. I'd wager every six months is a fair compromise and it looks like standard dues to an investor than say a monthly dividend would.

I'm not a tax man, I am in fact what you'd define a kid (19 years old), and a taxman/accountant is best suited to look at your particular needs as a business/household. Hope this helps (?)

It doesn't.

[henryhooverville]

I am not a contracter per se but...

My understanding of the tax system, from years of Money Box on radio, is that dividends can be really flexible in terms of when they arrive (monthly, bi/tri, 6 or 12 months etc.) however the tax implications can change.

For example a monthly dividend could be treated as a standard income when being assessed, quarterly is an option if you prefer near-constant payments and is more business like but still a compromise. Yearly dividends are the most popular and you'll find that it's used on most type B shares.

Now things get interesting if you are a listed company, in that the business can 'own' its own shares and not have to pay a dividend to itself (that would be odd) but to shareholders yes. I think small enterprises can claim EIS tax relief so investors don't have to pay income tax on those dividends.

That's all I really know, it depends on how you want your self-assessments to look if other people glance at it. I'd wager every six months is a fair compromise and it looks like standard dues to an investor than say a monthly dividend would.

I'm not a tax man, I am in fact what you'd define a kid (19 years old), and a taxman/accountant is best suited to look at your particular needs as a business/household. Hope this helps (?)

[vwdan]

I just take dividends whenever I feel like it

[SeededLoaf]

One divi on the 6th April then wait a whole 12 months. Rest goes into pension and business saving accounts.

I live on a £7k salary and travel expenses.

[vetran]

and likewise the third world should start feeling ashamed?

no pride doesn't require shame it lives well on its own.

But in the LEDCs (they don't like being called the Third world apparently) maybe we could shame the leaders & dictators who are mostly to blame for the last 50+ years instead of following the 'its the Imperialist west's fault' mantra.

India is doing well, Pakistan isn't. Hong Kong is doing well, Africa isn't. explain why.

Clearly something other than once being part of the Empire is causing these difficulties.

[kaiser78]

The traditional way was for companies to pay a dividend once a year, and a lot of companies still do that. Paying yourself less than you need to live on and topping it up with regular dividends is more of a tax avoider thing.

But most contractors take monthly dividends, no ?

[pr1]

You know I think its about time we started being proud of what we achieved.

and likewise the third world should start feeling ashamed?

[barrydidit]

Loose and Poor?

Nowt gets past you does it?

[MrMarkyMark]

Tight and Rich are the opposite of the two adjectives I would use to describe your old man, but there you go.

Loose and Poor?

[barrydidit]

The old man blackmails members of the judiciary on a similar schedule.

Tight and Rich are the opposite of the two adjectives I would use to describe your old man, but there you go.

[vetran]

first world successes

You know I think its about time we started being proud of what we achieved.

[northernladyuk]

Some of the share holdings I have pay 2 interim and one final. Bloody annoying as you have to work out why you suddenly have some money.

The old man blackmails members of the judiciary on a similar schedule.

[DaveB]

I've seen this mentioned in a post today and I don't want to hijack the thread to ask this question but how does someone make this work? I've seen it mentioned on the site before with regard to pensions (putting all ir35 contract earnings into a pension for example). I get that some of the guys on here have been doing it for years and might have a substantial pers acct warchest, but what's even the point of this? Isn't it just good sense to draw divis up to the top of the basic rates?

What am I missing?

I started out taking divi's on a monthly basis, then moved to quarterly, then 6 months and now do it annually. Taken 3 or 4 years to get to that point. The main advantage, other than looking more like a proper business, is that you can stick the lump sum in an offset mortgage account (which is what I do) or other higher interest earning account and draw down as you need it, earning much better interest on it than you would leaving it in the co. and drawing out a little each month.

[d000hg]

I guess the key is in the word "yet"?

I haven't yet taken dividends this last Co year, as I'm still "living" on divs paid to the max amount last Co year.

Same here, and with the divi-income tax changes I wanted more time to figure this out rather than rush in and take dividends before thinking it through.

Although in an ideal world you take your annual dividend out at the START of the tax year not the end because you have enough in the company account... then you can max out your ISA on day 1 and maximise the potential. I've not reached the point of being able to do that thus far though.

[SueEllen]

first world problems

Yep.