Dividends

[Joop123]

Hi everyone
If anyone could answer hopefully a quick question please....
At the moment me and the wife (directors) pay ourselves £585 each per month and also dividends of £2660 each per month to keep ourselves under the 40% bracket and pay no income tax. If we were to pay ourselves at the end of financial year a further £10000 each then what would this make our income tax liability and what would the cost be to the company ? Assume this is our only income.
Many thanks
Joop

 

[Robert Pearce]

Assuming that you have no other income, your salary and current dividends use up all of your basic rate band.

The effective rate of tax on dividends for a higher rate taxpayer is 25%, so an additional £10,000 dividend in 2012/13 would lead to a £2,500 personal tax liability, payable on 31 January 2014. A payment on account of £1,250 for 2013/14 would also be payable on 31 January and 31 July 2014 (although you could apply to reduce or remove these payments on account if the additional dividend was a one-off).

 

[Joop123]

Robert many thanks for the reply, would the only extra cost to the company be the £10000 being paid as a dividend ?
Also off topic if we were to receive this dividend from a totally separate company would the figures be the same.
Again many thanks

 

[Robert Pearce]

.....would the only extra cost to the company be the £10000 being paid as a dividend ?

Yes. This assumes that the company has sufficient accumulated profits from which to pay the additional dividend.

Also off topic if we were to receive this dividend from a totally separate company would the figures be the same?

Yes, they should be.

 

[Ola1]

Small note for the OP

Dividends are not a 'cost' to the company, rather a distribution of profit. Ergo not tax deductible, you probably already know that