LTD Company Tax Calculator?

polymaff

Dazed_and_confused wrote: »

Will be interested in polymaff's calculation/explanation

As tossing the hand-grenade seems to be flavour of the month, I'll join in by asking you two to consider two cases:

£48k Dividend Income, and nothing else - very much in the original spirit of this thread. How do you distribute the £48k? PA, then DA, then truncated BRB and finally the last £5k to HR? So D&C is correct - a truncated £27k it is)

Then, if you would, try re-running that HMRC Example 6 with the £40k and 9k replaced with £43k and £5k - just to make the point that, in some cases, the DA doesn't truncate the BRB and although the taxpayer is a higher-rate tax-payer he pays no higher-rate tax. (and what a can of worms THAT might open when it comes to taxing income such as State Pension Lump Sums!).

As I said, I'm not happy until I see how HMRC plans to deal with these cases, as stated in their own design documentation - whatever, and whenever, the final issue for 2016/17 may be.

Incidentally, as part of a written dialogue with senior staff at HMRC last year with regard to the implementation of PSA and DA, I tabled these two cases. That brought the dialogue to a halt.

Dazed_and_confused

In my opinion £48k dividends only income would be
£11000 covered by personal allowance
£5000 x 0% (dividend allowance rate band)
£27000 x 7.5% (basic dividend rate)
£5000 x 32.5% (higher dividend rate)

And the other scenario you suggest (43k wages and 5k dividend) would be
£11000 wages covered by personal allowance
£32000 x 20% (remainder of the wages)
£5000 x 0% (dividend allowance rate band)

TheCyclingProgrammer

My understanding too was that the first £5k of dividends were tax free and the remainder taxed at your marginal rate as the top slice of income.

polymaff

Dazed_and_confused wrote: »

In my opinion £48k dividends only income would be
£11000 covered by personal allowance
£5000 x 0% (dividend allowance rate band)
£27000 x 7.5% (basic dividend rate)
£5000 x 32.5% (higher dividend rate)

And the other scenario you suggest (43k wages and 5k dividend) would be
£11000 wages covered by personal allowance
£32000 x 20% (remainder of the wages)
£5000 x 0% (dividend allowance rate band)

Agreed on both - but I think that it is going to spook some that in the second example, a 0% band exists beyond the basic-rate band.

I hope that HMRC will release their documentation soon. I seem to remember that last year's documents were out before this time, last year.

Pennywise

Dazed_and_confused wrote: »

And the other scenario you suggest (43k wages and 5k dividend) would be
£11000 wages covered by personal allowance
£32000 x 20% (remainder of the wages)
£5000 x 0% (dividend allowance rate band)

No, the £5,000 is a zero rate not an allowance and it uses up the basic rate band so £5k of the £32k is used up leaving £27k BR and £5k h/r rate.

polymaff

Pennywise wrote: »

No, the £5,000 is a zero rate not an allowance and it uses up the basic rate band so £5k of the £32k is used up leaving £27k BR and £5k h/r rate.

But this contradicts that sacred cow - the Order of Taxation:

Compute Non-Savings Liability disregarding all other income
-then Compute Savings Liability disregarding Dividend Income
-then Compute Dividend Liability

Spooky

booksurr

polymaff wrote: »

But this contradicts that sacred cow - the Order of Taxation:

Compute Non-Savings Liability disregarding all other income
-then Compute Savings Liability disregarding Dividend Income
-then Compute Dividend Liability

Spooky

i agree that there is lack of final clarity in the info available at the moment, despite us being well into the tax year :huh:

however, as far as I have seen (and been instructed) dividend income counts towards total taxable income. Therefore, as "most" illustrations have chosen to show (I accept incorrectly in your view), where the dividend straddles a tax margin it is deemed to use up some of the lower margin since it is (as pennywise has stated) a zero rate band not an allowance.

as a band it applies in accordance with the sacred cow ....

that is certainly the way I read examples:
3 - where the residual personal allowance is used up first before the 5k nil rate band is applied
and
5 - where it categorically shows the residual subject to basic rate
and
6 - where "This leaves £3,000 of income that can be earned within the basic rate limit before the higher rate threshold is crossed".

Surely the same principle therefore applies at the other thresholds?

Dazed_and_confused

I agree with polymaff not pennywise on this one, the dividend income has traditionally been last to be taxed and I think it still should be.

If it wasnt then it will mean a lot of directors and shareholders will have have underpaid tax because PAYE tax rules will have allowed the basic rate band and then the dividends, often only known after the event, would alter this and generate a tax liability I.e the dividends would move some of the PAYE income into the 40% rate band :eek:

The fact that 3 or 4 of us see this all slightly differently goes to show just how complex this appears to have become (was this what George Osborne intended ) and it will be interesting to see what the tax return calculation looks like once eventually published.

TaxQuestions_2

booksurr wrote: »

depending on how pragmatic your accountant is that is exactly the sort of thing they deal with day in day out, and it can be very easily "regularised".

Thanks, let's hope so!

Apodemus

Pennywise wrote: »

No, the £5,000 is a zero rate not an allowance and it uses up the basic rate band so £5k of the £32k is used up leaving £27k BR and £5k h/r rate.

Oh, no! You guys must have been accessing my accounts! My crystal ball is predicting a year end of £45.5k paye income, £4.2k pension payments and £3k dividend income. So I fall right into this example!

I had been taking the HMRC advice at face value:

HMRC wrote:

The Dividend Allowance means that you won’t have to pay tax on the first £5,000 of your dividend income, no matter what non-dividend income you have.

Depending on the way this pans out, I might need to increase the pension payments!