have I crossed the 40% higher tax threshold

[johnsmith]

Even though I had joined this forum some time back, never had a chance a ask for some advice. So here we go,

I'm a sole-director working through a Ltd Company and have taken ( for 2008-09)

£ 6000 as salary (between April 08 - March 09)
£10,000 as dividend 1 (plus 10% tax credits)
£10,000 as dividend 2 (plus 10% tax credits)
£12,000 as dividend 3 (plus 10% tax credits)

£38,000 (plus the tax crediits from above)- TOTAL

I do have an accountant and I was told I could take out a net of 43,000 before going to the 40% limits.

I did ask this in another forum, and haven't really got anywhere with this- any advice and help really appreciated, thanks

 

[UKSBD]

By about £700 according to this,
http://www.contractorcalculator.co.uk/Dividend_Tax_Calculator.aspx

 

[johnsmith]

Thanks UKSBD,

Just wanted to add that my Tax Code is 713L for 2008-09, if that would make any difference to the calculations

 

[Stevej]

In 2008\09 you can earn £34,600 before you start paying tax at higher rates. In ADDITION the normal tax free personal allowance is £6,035 making the effective threshold for higher rate tax £40,635
You have earned £35,555 gross divis plus £6k salary - total £41,555

However, your PAYE code appears to indicate that you have some tax reliefs in addition to your personal allowance - this is probably interest relief or something similar. If your code is correct this increases your tax free allowances to £7,135 and increases the higher rate threshold to £41,735 - which means you would be just below the higher rate band

You should note that your tax code gives an estimate only of your tax allowances available. Now that the tax year has ended you should be able to give your accountant the information he needs to confirm the calculations above

 

[Groovy Train]

I may be wrong, but if you do slightly go over the limit, you could put the excees through as a Director's loan ... assuming it is below £5k

 

[Jenni384]

I may be wrong, but if you do slightly go over the limit, you could put the excees through as a Director's loan ... assuming it is below £5k

If it's below £5k, there are no personal income tax implications.
However, the loan must be repaid (as actual money, or by way of salary or dividends) within 9 months of the year end, or the company will suffer 25% s419 tax on the balance, until it is repaid.

 

[johnsmith]

thanks Groovy Train and Jenni384,

My other problem is that I would have an estimate of approx 750 - other additional income- from savings -for the 2008-09 period. so this along with the dividends and salaries, will take me above the 40% threshold.

Can I now do the necessary adjustments -for the Director's Loan ?

 

[Groovy Train]

I would, but i'd do it in conjunction with my accountant...

 

[Jenni384]

I would, but i'd do it in conjunction with my accountant...

Agreed. It's possible to structure this to keep you under the 40% band, but I would recommend you do this with an accountant who knows the full picture.

I wouldn't want to give you DIY instructions for this on a forum as I don't know your precise circumstances.

 

[johnsmith]

thanks again,

My current accountant is kinda novice into the kind of trade which I'm in. So there are times when I have to call up & suggest the best way -and then agree on a plan.
I had taken the salary + dividend in agreement with the accountant who also knew about the income from the savings. Before anybody jump up and say things, I'm quite happy with my accountant and has no plans to change.

Just want to make sure that my ideas are legitimate before I discuss it with my accountant.

thanks again