Tax year or Accounts Year?

Discussion in 'Accounts & Finance' started by stclare, Jul 24, 2021.

  1. stclare

    stclare UKBF Newcomer

    72 7
    Hi, this is probably a very simple question for most, but I can not seem to find the answer on line so I am hoping you can help.

    Is the tax paid on dividends calculated based on my company accounts year Sept-August or on the tax year April to April? or even more confusing none of these.

    Thank you for your help.
    Posted: Jul 24, 2021 By: stclare Member since: Mar 7, 2011
  2. DWS

    DWS Contributor

    236 36
    In a tax year, April to April
    Posted: Jul 24, 2021 By: DWS Member since: Oct 26, 2018
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  3. stclare

    stclare UKBF Newcomer

    72 7
    Thank you.
    Posted: Jul 24, 2021 By: stclare Member since: Mar 7, 2011
  4. Spur Support Services

    Spur Support Services Full Member

    326 68
    Dividends are taxed in the hands of the recipient and therefore taxed within the submission of the income tax return based on the YE 5 April.

    But bear in mind that in order to issue dividends you will have generated company profits after corporation tax, and the company profits are taxed in line with the Companies Accounting year (August).

    Dividends can be paid out of Retained Profits after tax, both brought forward and current year, but a dividend cannot be legally paid without Accumulated Retained Profits after Corporation Tax.

    So when you are considering dividends and cashflows you need to have an idea of the corporation tax arising on the current year profits,

    This is why I always like my clients to use Xero accounting software to keep their records up to date and allow us to have a conversation early in the final month of the Company's Financial Year, to ensure that tax and dividends are considered correctly
    Posted: Jul 25, 2021 By: Spur Support Services Member since: Aug 21, 2020