Does anyone take out a Dividend routinely?

skyjumper

hi guys,

i have been here before and has got good advice.

need to clarify something

Under a limited company I'm drawing a small salary and planning to take out the profits as dividends. I'm the only share sholder and would like to take out £30K for the financial year 2008-09. I have already taken out £ 10K in June. I would like to take out the other 20K in the next 2 months. then i don't want to take out anything until next financial year. is this possible to do this if the company is running is running in profit.

Do I have to wait for certain time ( months) before taking out £10K and another few months for the next £10K?

any advice or suggetions welcome

fengirl_2

You can declare dividends as often or not as you want. You do realise you are not contributing to your State pension by doing this?

skyjumper

thanks fengirl for the quick reply

I understand I'm not contributing to the State pension. it's a choice i had to make under my personal circumstances. I have been contributing in the past and probably will be in the near future, but for the time being this is the only way i could run my company

thanks anyway

McAzrael

Are you taking them out of retained profits? Corp tax is cheaper than income tax (usually).

skyjumper

McAzrael

Could yo please explain a bit on what you have suggested,
Corp tax cheaper than Income tax??

Pennywise

As long as you're paying the standard £450 per month wage (no tax nor NIC), then you are getting a "credit" towards state pension. You don't have to pay any NIC to secure a contribution - just as long as you pay above the lower NIC threshold, you get the credit. Just make sure that you are running a PAYE scheme and sending in the P14 each year end showing that you're wage was above the NIC threshold you'll get a credit towards basic state pension. If I remember rightly, you also get a credit towards the earnings related state second pension - even though you earn less than £10k in wages, it is put on your record as if you were earning £10k (an incentive to help the lower paid!!!) so you'll be accruing the state 2nd pension as well as basic pension.

McAzrael

skyjumper wrote: »

McAzrael

Could yo please explain a bit on what you have suggested,
Corp tax cheaper than Income tax??

I think you need an accountant. If you leave the money in the company so that it becomes retained profit, then the company will have to pay corporation tax on it. However, it is quite often BUT NOT ALWAYS the case that you will be able to pay dividends out of the retained profit with no further tax liability. Corp tax starts at 21% and runs up to 29%, income tax starts at 20% and runs up to 40%. Wages are also liable to NICs by both the employee and the employer. You need an accountant. As Pennywise says, you need to be paying yourself some wage to make use of your personal tax allowance (and getting your stamps paid). If you have a wife or husband who isn't making full use of their tax allowance then get something done about that. And get an accountant.

skyjumper

pennywise and McAzrael,

thanks for the advice. I have got an accountant who's helping me with the P.AY.E and book keeping. just wanted to make sure I could take out the dividend of 20K together rather than 10K after certain intervals? will that make any tax implications for me or the company?

stphnstevey

Pennywise wrote: »

As long as you're paying the standard £450 per month wage (no tax nor NIC), then you are getting a "credit" towards state pension. You don't have to pay any NIC to secure a contribution - just as long as you pay above the lower NIC threshold, you get the credit. Just make sure that you are running a PAYE scheme and sending in the P14 each year end showing that you're wage was above the NIC threshold you'll get a credit towards basic state pension. If I remember rightly, you also get a credit towards the earnings related state second pension - even though you earn less than £10k in wages, it is put on your record as if you were earning £10k (an incentive to help the lower paid!!!) so you'll be accruing the state 2nd pension as well as basic pension.

Didn't quite understand this till then

£450 is below the Earnings Threshold but above the Lower Earnings Limit for NI - therefore no NI. Also, as the threshold for Income Tax (ie the personal allowance) is the same as Earnings Threshold for NI, no income tax either