Limited company Accounts Advice
Discussion
I already have a limited company setup, but only pay myself a small amount of money to me as its only a small project but retain all profits for the company itself.
I also have a sole prior company. I am looking at switching this to Limited but if i pay myself a small amount so i do not go over the mid tax band (20k ish) and pay the rest in dividend profits what tax rate would the dividends work out to be??
Also what are the terms of sponsoring say a small race team. I have looked at sponsoring a few times but left it but if it reduces my tax bill and helps someone else out i will happily let the money go.
Steve
edited to add
is there any comparision tools that can calculate the rough amount of tax liable for each case Limited V SP
>>> Edited by stevieb on Tuesday 20th January 10:41
I also have a sole prior company. I am looking at switching this to Limited but if i pay myself a small amount so i do not go over the mid tax band (20k ish) and pay the rest in dividend profits what tax rate would the dividends work out to be??
Also what are the terms of sponsoring say a small race team. I have looked at sponsoring a few times but left it but if it reduces my tax bill and helps someone else out i will happily let the money go.
Steve
edited to add
is there any comparision tools that can calculate the rough amount of tax liable for each case Limited V SP
>>> Edited by stevieb on Tuesday 20th January 10:41
Speak to an accountant. However:
Dividends are taxed at 10% up to the basic rate limit and 32.5% above the basic rate limit. Don’t forget a 10% tax credit is added to the dividend before calculating the tax. So for example (assuming a single persons allowance of 4,615 i.e. a basic rate limit of 6,535):
5,000 salary, 35,000 dividend.
Dividend with 10% tax credit = 38,888.89
Portion below basic rate = 1,535, so 10% tax = 153
Portion above basic rate = 37353.89, so 32.5% tax = 12140
Total tax on dividend = 12293
10,000 salary, 30,000 dividend
Dividend with 10% tax credit = 33333.34
You’re already above the basic rate limit on you salary so the whole dividends taxed at 32.5% = 10833.34
Obviously you’d need to add the PAYE on the salary to both of the above figures.
Also you don’t pay NI on dividends but watch out for IR35 if you are a personal service company and do the work yourself and also this may be changing with IR591 (see elsewhere on this forum).
You could probably work out the difference in tax by plugging the two set’s of numbers into the IR web site and seeing what it comes out with (I assume they allow you to do this without actually submitting a return).
Please note I’m not an accountant or an IFA so speak to one and please don’t take the above as gospel.
Dividends are taxed at 10% up to the basic rate limit and 32.5% above the basic rate limit. Don’t forget a 10% tax credit is added to the dividend before calculating the tax. So for example (assuming a single persons allowance of 4,615 i.e. a basic rate limit of 6,535):
5,000 salary, 35,000 dividend.
Dividend with 10% tax credit = 38,888.89
Portion below basic rate = 1,535, so 10% tax = 153
Portion above basic rate = 37353.89, so 32.5% tax = 12140
Total tax on dividend = 12293
10,000 salary, 30,000 dividend
Dividend with 10% tax credit = 33333.34
You’re already above the basic rate limit on you salary so the whole dividends taxed at 32.5% = 10833.34
Obviously you’d need to add the PAYE on the salary to both of the above figures.
Also you don’t pay NI on dividends but watch out for IR35 if you are a personal service company and do the work yourself and also this may be changing with IR591 (see elsewhere on this forum).
You could probably work out the difference in tax by plugging the two set’s of numbers into the IR web site and seeing what it comes out with (I assume they allow you to do this without actually submitting a return).
Please note I’m not an accountant or an IFA so speak to one and please don’t take the above as gospel.
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