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...…...

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

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

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.

(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

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 £.

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 ?

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

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)

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

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.