How much could I earn?

[RickyLocks]

Hi, I hope someone could help.

I am looking to start a small Ltd trading business in the coming months.
I currently take home about 18k from my job, I would be looking to take a similar amount out of the new company, as I have a number of repayments etc. With a mix of salary and dividends how much would I have to make to take out this sort of money?

Many Thanks

Rickylocks

[Alpha]

Not a straightforward question to answer as there are lots of variables to take into consideration. The straightforward unconsidered answer would be requiring a profit before tax of around £16k assuming you take £4k in salary and the rest in dividends.

[gj]

Profits before tax and before any salary for you of around £23,000 per annum would give you a net income of just over £18,000 taken in a tax and national insurance efficient mix of salary and dividend, assuming no other income.

[Alpha]

Graham

I do not follow your answer to this.

Can you outline your calculation for my benefit as I still stand by my answer.

[gj]

Alan

I put £23k, but have just realised I added the salary figure to the required net of £18k, instead of to the profit before tax, to get back to the profit before tax and salary. I should have gone to bed, instead of looking at the forum!

My figure should be £21k, not £23k which I think ties in with your figure, subject to roundings, just shown it in a different way.

So my calcs are Profit before tax and salary £21k, less salary £5k (4,895) = 16K, less Corporation Tax at 19% say £3k = dividend £13k, plus salary net £5k (no tax or NI) = 18k as required.

I made your reply 17K net, being £16K (AFTER the assumed salary of 4K) less 3K Corporation Tax thereon, plus the 4K salary with no tax or NI, but I guess the difference is only roundings on the salary level etc.

Now I am going to bed!

Regards


Graham

[Alpha]

I understand now. My calculation was very much rounded but ties in with yours in principle.

Anyway good to see you back posting on the forums.

[gj]

Thanks Alan, good to be back posting again