Dividends and Tax credits

Summer_Dreams

Is it still ok to receive tax credits if all your income is paid through dividends from a limited company? Or could they say you aren't working the 16 hours minimum?

And what about if you have a partnership, so also put the hours in but it makes a trading loss?

If so, is the amount you tell tax credits the dividend income or the dividend income minus the partnership loss?

Tia

fishybusiness

Re dividends......income is income, dividends are tax efficient but it is still money you take and spend, so TC need to know.

Trading losses are your liability.

An accountant would sort this out for you.

Summer_Dreams

Yes, I am aware dividends are income and have to be declared, but wondered since it wasn't taken as earnings if they would possibly say that I wasn't working 16 hours because of this.

Accountant is unsure of whether to give tax credits the figure of dividends or dividends minus partnership loss to work out their calculation! (He says hes an accountant not benefits advisor, just wondered if anyone here knew!)

Darksparkle

They may question it but then you’ll just explain that company directors aren’t subject to nmw.

You declare your taxable income as per your tax return. Your accountant should be able to tell you this (if not get a new accountant).

Summer_Dreams

I'm a shareholder and the company secretary in a family business, help out and receive a dividend payment, therefore the director rule wouldn't apply. I realise for next year I should ask for the payment in wages rather than dividends would save the company tax and any confusion with tax credits, but was just starting to worry for the previous tax year!

I think i do need a new accountant, however it is for the partnership business and my other partner will not agree, the business makes a loss and I would rather get out but cannot see any way to take out the capital I invested, but that's another story!!

So in answer to what I tell tax credits, it should be total income received (disregarding any losses), just wondered because when I was working PAYE I used to get a tax refund when the partnership made a loss!

Darksparkle

You’d only be able to then declare hours worked if you are an employee and therefore subject to nmw. A shareholder is not remunerative work.

Summer_Dreams

ok thank you, I think I understand that bit.

Does the 16 hours working (single mum) only apply to working tax credit? I read on another thread you can still claim child tax credit regardless, is that true?

Darksparkle

You don’t need to work to claim child tax credits.

Icequeen99

Summer_Dreams wrote: »

I'm a shareholder and the company secretary in a family business, help out and receive a dividend payment, therefore the director rule wouldn't apply. I realise for next year I should ask for the payment in wages rather than dividends would save the company tax and any confusion with tax credits, but was just starting to worry for the previous tax year!

I think i do need a new accountant, however it is for the partnership business and my other partner will not agree, the business makes a loss and I would rather get out but cannot see any way to take out the capital I invested, but that's another story!!

So in answer to what I tell tax credits, it should be total income received (disregarding any losses), just wondered because when I was working PAYE I used to get a tax refund when the partnership made a loss!

So are there 2 separate businesses? What type of partnership is it you are involved in? Normally partnerships are taxed as self-employed individuals unless it is a LLP or something?

I would definitely be getting a new accountant.

I can't think what partnership losses your accountant thinks can be deducted from dividend income.

IQ