Ltd Company - Dividends - Tax

[rubberdubber]

Hi
Hope someone can answer my query

hubbie and i run a ltd comany and are on the minimum monthly wage so no tax or ni are payable

we get dividends - so far we have had £8k each
and hopefully this / next month we should receive another £8k - meaning that we will get around £21k (dividends + wages) this year each

now the company was formed on may 1st - however im wondering about personal tax

is it logical to take as much this tax year in dividends as we are well under the higher rate tax threshhold (and can take some if wanted now) , OR take the dividends late april, when we know the the profit of the company.
which would mean if we have a profitable year - we might get close to higher rate tax

hope you understand my question

thanks

 

[jpcentral]

I'm slightly worried by your question. You are only supposed to pay dividends after confirming that there are sufficient reserves (profits in this case) after allowing for Corporation Tax and other accountancy adjustments (accruals, prepayments etc). If you won't know how profitable your company is until April, you will have difficulty in properly working out how much dividend to pay now.

However, provided you can confirm that there are sufficient reserves, paying dividends to take full advantage of your basic rate tax band would probably be sensible. You can always lend the money back to the company.

John Perry
Central Business Services
Loughborough

 

[rubberdubber]

its ok - the dividend we took out had the corperation tax accounted for, likewise the next dividend we know that we can take a dividend and have still lots over for the tax etc...

thats what i mean, is it better to take a smaller amount now this tax year, than take a bigger one next month - as it will be next years tax year

 

[jpcentral]

In which case, you are probably better to take the dividend in this tax year (before 5th April) even if you then just credit it to your Directors Loan Account.

John Perry
Central Business Services
Loughborough

 

[HAZEL B]

Hi

Have you had interim accounts done or at least a profit forecast done by your Accountant?

If you are using software and relying on the figures straight from the computer then these can be very mis-leading. I frequently see people whose Sage software is showing a profit which by the time I have gone through the
figures turns into a much smaller figure or even a loss.

Speak to your Accountant and he/she will advise you based on your individual circumstances (taking in pension contributions other income etc), although on the face of it using up your lower rate band seems advisable.

 

[DavidT]

I agree with Hazel, not to suggest you haven't considered everything but many people in business aren't actually aware of their real financial position.

Providing the basics such as reconciliations, adjustments for expense accruals and possible deferred/unearned income are done, then you will be heading in the right direction.

As for your situation with the dividends... in the real world you (the accountant) will be able to adjust accordingly at the year end.

David Toohey
The Accountants Circle
Accountant & Bookkeeper Forums | Find Me an Accountant

 

[Jenni384]

Aye, agree with Hazel and David

 

[rubberdubber]

thank you all -
i will speak to our accountant today -

 

[franglaisaccounts]

hello
just to add that I strongly agree with the comments made about checking real figures after ALL deductions and adjustments have been made. Certainly a lot of my customers have been misled by checking periodic accounting statements that havent been reconciled for the year.