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  • FIRST POST
    • kerrypn
    • By kerrypn 20th Mar 17, 2:39 PM
    • 1,180Posts
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    kerrypn
    Winding up Ltd/dividends question
    • #1
    • 20th Mar 17, 2:39 PM
    Winding up Ltd/dividends question 20th Mar 17 at 2:39 PM
    Hi

    Please could someone help me as my accountant is not being very clear with me. I was employed as PAYE April 2016 to October 2016 circa 30k per annum salary.

    In October I joined an agency and on advice started a Ltd company. For various reasons I am going back to a PAYE position for the next tax year.

    In effect Oct through to March my Ltd company has had a turnover of approx 13k, and approx 4000 of this is my wages, approx 1500 expenses and the remaining balance I intend to share between myself as majority shareholder and the only other shareholder. Neither share holder will receive more than 5k dividends. My accountant advised me to leave enough in the account to cover corporation tax (7.5% of profit?) But is this before dividends or after? As I will be winding up the company all monies left will be paid as dividends. I want to close the business account asap as there are charges to keep it open. My plan was to remove the balance, pay the accountant and then divide the rest between shareholders.

    My question is, if both shareholders receive 5k or less dividend will there be any personal tax to pay on this (no other income)

    And secondly how much should I save for corporation tax?

    There is approx 4k in the business account currently (dividends are drawn month to month)

    Thanks in advance for any advice I just want to make sure I've saved enough to pay my taxes!
Page 1
    • antrobus
    • By antrobus 20th Mar 17, 3:27 PM
    • 14,909 Posts
    • 21,119 Thanks
    antrobus
    • #2
    • 20th Mar 17, 3:27 PM
    • #2
    • 20th Mar 17, 3:27 PM
    ... My accountant advised me to leave enough in the account to cover corporation tax (7.5% of profit?) But is this before dividends or after? ...
    Originally posted by kerrypn
    CT for 2016/17 is 20%, and that's before dividends.

    ...My question is, if both shareholders receive 5k or less dividend will there be any personal tax to pay on this (no other income)...
    Originally posted by kerrypn
    Personal dividend allowan ce is £5,000 for 2016-17 and 2017-18, so that should cover it. Assuming you have no other dividend income.

    ..And secondly how much should I save for corporation tax?...
    Originally posted by kerrypn
    £13,000 less £4,000 less £1,500 is £7,500, times 20% is £1,500.
    • kerrypn
    • By kerrypn 20th Mar 17, 3:40 PM
    • 1,180 Posts
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    kerrypn
    • #3
    • 20th Mar 17, 3:40 PM
    • #3
    • 20th Mar 17, 3:40 PM
    That's really helpful thank you so much!
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 20th Mar 17, 3:59 PM
    • 2,583 Posts
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    TheCyclingProgrammer
    • #4
    • 20th Mar 17, 3:59 PM
    • #4
    • 20th Mar 17, 3:59 PM
    Another tip, if you've not already registered for self-assessment, then assuming you do end up only receiving dividends within the dividend allowance and consequently owe no further income tax, don't bother registering - you don't need to as you've got no tax to pay or report. Ignore anyone telling you that company directors HAVE to register - its wrong (and so is the HMRC website).

    As above, you should have a taxable company profit of £7.5k so corporation tax will be £1500 leaving you with £6k to distribute between shareholders. Assuming you're both 50/50 shareholders you'll receive a dividend each of £3000.
    • kerrypn
    • By kerrypn 20th Mar 17, 4:15 PM
    • 1,180 Posts
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    kerrypn
    • #5
    • 20th Mar 17, 4:15 PM
    • #5
    • 20th Mar 17, 4:15 PM
    Thanks so much for this, feel a lot better about it all now was finding it very stressful!

    I think my accountant has already registered me unfortunately as wasn't expecting it to be so short lived!
    • polymaff
    • By polymaff 21st Mar 17, 2:18 PM
    • 1,592 Posts
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    polymaff
    • #6
    • 21st Mar 17, 2:18 PM
    • #6
    • 21st Mar 17, 2:18 PM
    If the company is to be dissolved and the shareholders don't use much of their Capital Gains allowance, why not make a capital distrbution? You're allowed to distribute up to £25k in the last two years of a company's lifetime, and the distribution is treated as a capital gain, not as income.
    Last edited by polymaff; 21-03-2017 at 2:21 PM.
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 21st Mar 17, 7:48 PM
    • 2,583 Posts
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    TheCyclingProgrammer
    • #7
    • 21st Mar 17, 7:48 PM
    • #7
    • 21st Mar 17, 7:48 PM
    If the company is to be dissolved and the shareholders don't use much of their Capital Gains allowance, why not make a capital distrbution? You're allowed to distribute up to £25k in the last two years of a company's lifetime, and the distribution is treated as a capital gain, not as income.
    Originally posted by polymaff
    Because it makes no difference (£3k dividends each covered by dividend allowance vs capital gain within CGT allowance)? Unless the shareholders also have dividend income elsewhere a dividend seems like the simplest route.
    • polymaff
    • By polymaff 21st Mar 17, 7:54 PM
    • 1,592 Posts
    • 678 Thanks
    polymaff
    • #8
    • 21st Mar 17, 7:54 PM
    • #8
    • 21st Mar 17, 7:54 PM
    Because it makes no difference (£3k dividends each covered by dividend allowance vs capital gain within CGT allowance)? Unless the shareholders also have dividend income elsewhere a dividend seems like the simplest route.
    Originally posted by TheCyclingProgrammer
    You assume that it makes no difference - then you confirm that there might be circumstances that would make a difference.

    Brilliant.
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 22nd Mar 17, 12:15 AM
    • 2,583 Posts
    • 1,417 Thanks
    TheCyclingProgrammer
    • #9
    • 22nd Mar 17, 12:15 AM
    • #9
    • 22nd Mar 17, 12:15 AM
    Yes, my assumption is that in OPs case it makes no difference as they've given no indication that they have any other dividend income. I think it's a fair assumption.
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