Is dividend tax already worked into this table from my accountant ?

Discussion in 'Accounts & Finance' started by VictoriaZaZ, Mar 16, 2019 at 1:29 PM.

  1. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    Sorry for the multiple threads but looking to turn into a LTD co and finding it hard to understand a lot of stuff as it's so new to me. My accountant did a table of figures to show me how things would work if I incorporate now. But I cannot fathom if dividend tax has been factored into his numbers. Can someone check please ? This all relates to where I would stand when it comes to the January 2020 payment

    2018-19 turnover of 90k, less expenses of 12k so net of 78k

    Less director's salary 8, 400 = net profit for company 69, 600

    Corporation tax of 19% on this figure = 13, 224

    Therefore net profit available for dividend = 56, 376
    ____________________________________________________________

    Income tax allowance 11, 850
    Basic rate 20% 34,500
    TAXABLE INCOME 46,350
    __________________________________
    Breakdown of taxable income :

    SA tax per PTP in-year calculator 2,437
    Corporation tax 13,224
    TOTAL TAX IF INCORPORATED 15,661
    _____________________________________________

    Net monthly income £3,659 (of which 700 per month is salary, the rest dividends. Adds up to 43,908 for the year)

    NOW MY QUESTION IS THIS :

    Where he has put my "net monthly income" as £3,659, has he already factored in dividend tax ? As I do not see the figure of 7.5 % written anywhere on his print out. Is the phrase he used "SA tax per PTP in-year calculator" some code for "dividend tax" ?

    So either it has been included, or I have to then pay further tax on this monthly net income in respect of the % of that figure which is dividends.

    Which is it, as I don't understand all the mathematical complexities here and my brain is melting...…...:(
     
    Posted: Mar 16, 2019 at 1:29 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #1
  2. UrbanRetail

    UrbanRetail UKBF Regular Free Member

    166 44
    Shouldn't that a question for your accountant?
     
    Posted: Mar 16, 2019 at 1:42 PM By: UrbanRetail Member since: Mar 3, 2012
    #2
  3. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    Yes, but he is not around until Monday and the issue is bugging me. I thought someone here might be able to understand his sums and give me an answer today
     
    Posted: Mar 16, 2019 at 1:43 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #3
  4. KAC

    KAC UKBF Enthusiast Free Member

    970 216
    PTP is a firm providing tax advice and products to accountants. presumably the reference is to calculations using a product provided by that firm. I think they are now Absolute Tax
     
    Posted: Mar 16, 2019 at 2:29 PM By: KAC Member since: May 7, 2017
    #4
  5. Somos Accounting

    Somos Accounting UKBF Contributor Free Member

    39 10
    It looks like the full breakdown isn't given....

    Your personal income from the company would consist of £8,400 salary and £56,376 dividend, using the above calculations (assuming you declared all the company profits as dividend and assuming you're the sole shareholder too). Therefore your total income would be £64,776.

    This is then what goes into your personal calculation.

    Personal allowance - £11,850 - 0% - £0
    Dividend allowance - £2,000 - 0% - £0
    Dividend basic rate - £32,500 - 7.5% - £2,437
    Dividend higher rate - £18,426 - 32.5% - £5989

    Total tax - £8,426

    Net income after personal tax - £56,350 P/A or £4,695 p/m.

    The company would have paid the Corporation Tax already (£13,224), so this wouldn't come off again.
     
    Posted: Mar 16, 2019 at 2:51 PM By: Somos Accounting Member since: Oct 17, 2018
    #5
  6. UKSBD

    UKSBD Not a real duck Staff Member

    9,027 1,692
    (approx. figures)
    Assuming not taking all the profit, just up to higher rate tax band

    Looks like he has assumed a dividend of £37950

    £37950
    - £3450 (take you up to tax threshold)
    - £2000 (dividand tax allowance)
    = £32500

    £32500 - 7.5% = £2,437 tax to pay

    £37950 - £2437 = £35513

    divi after tax 35513
    + salary 8400
    =
    £43913

    £43913 divided by 12 = £3659.41

    Edit to ad: leaving about £10k in the business
     
    Posted: Mar 16, 2019 at 3:22 PM By: UKSBD Member since: Dec 30, 2005
    #6
  7. Somos Accounting

    Somos Accounting UKBF Contributor Free Member

    39 10
    It ultimately depends on how much dividend is required, but commonly to take up to the higher rate is the way to go.

    The above is using 18/19 rates too, so maybe worth asking your accountant for the same calculation for 19/20, though it will only stand to change a couple hundred £.
     
    Posted: Mar 16, 2019 at 3:46 PM By: Somos Accounting Member since: Oct 17, 2018
    #7
  8. nelioneil

    nelioneil UKBF Enthusiast Full Member

    588 76
    It's the weekend, most accountants don't work on the weekend!
     
    Posted: Mar 16, 2019 at 4:23 PM By: nelioneil Member since: Jan 22, 2013
    #8
  9. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    Thanks so much, it's hugely appreciate. NOW I understand and can see that yes, the dividend tax has already been accounted for by the time the monthly net income of 3,569 is reached.
    And yes, I'm not taking out the max dividends of 56k to avoid higher tax.

    For some reason though my sums had it so that way more would be left in the business ?


    What am I missing here ?!

    If there's only 10 k left in the business after I've taken the 43.9 k overall income, then that's a total of 53.9k . That is a 24. 1 k difference between the 78 k net business figure so where the heck has all that gone to if I have paid the 15k tax bill ?
     
    Last edited: Mar 16, 2019 at 4:51 PM
    Posted: Mar 16, 2019 at 4:44 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #9
  10. UKSBD

    UKSBD Not a real duck Staff Member

    9,027 1,692
    I missed the £8400 taken as wages already

    it's 56, 376 - 37950

    £18426 left in the business
     
    Posted: Mar 16, 2019 at 5:06 PM By: UKSBD Member since: Dec 30, 2005
    #10
  11. Newchodge

    Newchodge UKBF Big Shot Free Member

    11,316 2,901
    Quite frankly I can't be arsed to work it out, as you can ask your accountant on Monday. But it looks like corporation tax
     
    Posted: Mar 16, 2019 at 5:10 PM By: Newchodge Member since: Nov 8, 2012
    #11
  12. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    LOL, don't blame you. I like to solve things I don't understand , I'm impatient for Monday.

    I just assumed that if total amount available for dividend is 56, 375 then I add on the 8, 400 salary, this totals 64, 775 which is basically "what is left" after expenses and corp tax from the turnover starting point of 90k. If I were a sole trader I would consider this as being the figure "I" have earned after the tax man takes his cut and I factor in my expenses. I get the company is separate from me but I still think of it as "my" money - they just abstract everything to confuse the brain.

    If I only take dividends of 37, 926 on top of the 8, 400 salary , that totals 46, 326 , meaning that should be 18, 449 left sitting in the company, not 10.

    (64, 775 - 46, 326 =18, 449)
     
    Posted: Mar 16, 2019 at 5:20 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #12
  13. Newchodge

    Newchodge UKBF Big Shot Free Member

    11,316 2,901
    Please stop thinking about this and talk to your accountant.
     
    Posted: Mar 16, 2019 at 5:24 PM By: Newchodge Member since: Nov 8, 2012
    #13
  14. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    Ah, fabulous. I worked out my own sums before seeing your new post. There's only a few quid difference .
    I can rest my mind now as I was wondering where on earth all my money had gone and how come I ended up getting so little after starting with a 90k turnover !!
    Everyone's help here has been much appreciated. It's been a good exercise for me to truly understand what is essentially a new language …..never done so many sums since bloody high school ! Bits of paper and notes everywhere here, lol
     
    Posted: Mar 16, 2019 at 5:26 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #14
  15. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    I can now as thanks to your help and others here, I now understand my position and the sums.
     
    Posted: Mar 16, 2019 at 5:59 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #15
  16. SteLacca

    SteLacca UKBF Ace Free Member

    1,209 238
    PTP was bought by IRIS years ago (it was a good product until then).

    Anyhoo, to answer the OP, there is no such thing as dividend tax anymore (assuming you mean the notional tax credit that used to exist and covered tax on basic rate dividends). That was abolished by the Tories.

    Nowadays, income tax is calculated by reference to your total income (with dividends forming the top slice), and the appropriate tax rate used.
     
    Posted: Mar 17, 2019 at 1:05 PM By: SteLacca Member since: Jun 16, 2016
    #16