Accountant help please

Discussion in 'The Lounge' started by Eveadel, Nov 21, 2007.

  1. Eveadel

    Eveadel Well-Known Member

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    My husband has his own business and every month he has been drawing a wage and a dividend. He is paying tax & ni on the wage but not paying tax on the dividend is this correct?? Is there a limit to how much dividend you have?
     
  2. Emmylou

    Emmylou Well-Known Member

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    I think he'll need to declare the dividend payments when he does his self-assessment for tax, as he will need to pay some sort of tax on that eventually.
     
  3. Emmylou

    Emmylou Well-Known Member

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    Here's some info taken from Here

    So I think what thats saying is that if the overall income is below £34,600 then there should be no tax to pay, because the way the dividend is paid includes a 10% tax credit which covers the 10% tax deduction that would be due.
    If the overall income is over £34,600 then there will be some tax to pay, as the tax on the higher income is 32.5% not the standard 10%.

    Does that make sense? :think:
     
  4. Eveadel

    Eveadel Well-Known Member

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    Hi thanks for your reply.

    Im abit thick so it doesnt make sense to me :shock:

    Just for example he is paying himself £1000 a month wage and then a £2000 dividend a month. He is paying tax & ni on the £1000 wage of approx £350 a month. So should we be putting some money away for tax for the dividend?????????

    Thanks
     
  5. Eveadel

    Eveadel Well-Known Member

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    Hiya just wondered if anyone could advise please. Thanks in advance
     
  6. Emmylou

    Emmylou Well-Known Member

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    Hi hun :wave:

    Not been on since last post, sorry......do you have an accountant that processes the wages and dividend payment? If so they should be sortng the whole 10% credit/ tax issue on the dividend....if he takes out the full £2000 and doesn't have a dividend certifiate to produce with his self assessment then you may have to pay some tax.

    A brief calculation shows that your husband takes £36,000 a year in salary & dividends (before tax & NI), therefore he must pay 32.5% tax overall (he'd probably be better off financially to take that little bit less out of the business to bring his salary to less than the £34,600 - so take £34,500 to be within the limit - as he would pay a lower tax rate, and prob end up with more than if he takes what he currently takes and pays the higher tax?!)

    If he takes the £36,000 out then yes, you'll need to put some money aside for a tax payment once the self assessment has been completed.

    Definitely chat with your accountant about the benefit of taking less money to below the £34,600 and therefore pay less tax.
     
  7. Eveadel

    Eveadel Well-Known Member

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    Ah thanks so much for the advice, I will speak to our accountant :D :D
     

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