when does dividend tax kick in if allowances

heleen

Hi there

I runa limited company and pay myself about £18k salary and the remainder in dividends.

My udnerstanding is that I would personally pay 0 tax on the £18k dividends that then make up the £36k high rate tax threshold.

However, what happens if on top of my salary I get income from rental, but then also deductions netting it in a loss?

Is if:

18k salary
2k income
----
20k income
therefore 16k dividend tax free
minus allowances


or is it
18k alary
2k income
-3k allowances

---

17k income
and therefore 19k dividend tax free

Just need to know the sequence of when deductions get taken into account.

Thanks

Heleen

mitchaa

Are dividends not taxed at 10% and you also have corporation tax to pay?

I doubt you can just withdraw the whole £18k without any penalties.

Im sure someone will come along soon with good advice/info

heleen

Long story but dividends have a 10% tax credit because you've paid corporation tax so net personally I pay 0.

CCheck it out on direct.gov.uk

strongboes

Not in reply to your original question sorry, but cant you pay your self less of a salary, £5435 next year ideally, and make the rest up in dividends? Less tax and ni for you to pay!

mrkbrrws

A property loss can only be carried forward against future property profits (unless furnished holiday letting), so in the second example you should just have £18k income.

You then take off your personal allowance (2008/09 - £5,435) to get £12,565. This leaves you with £23,435 remaining in the basic rate band, but note that this represents the gross dividend you could draw to just stay in the basic rate band (i.e. dividend received + 1/9th notional tax credit), so the dividend you actually draw would be £21,092.

heleen

strongboes wrote: »

Not in reply to your original question sorry, but cant you pay your self less of a salary, £5435 next year ideally, and make the rest up in dividends? Less tax and ni for you to pay!

Yes, I know I could pay myself less, but as I do earn quite a bit, I dont' think it's fair to entirely reduce my NI etc :A . So I am making a reasonable contribution - but still taking advantage of loopholes.

heleen

mrkbrrws wrote: »

A property loss can only be carried forward against future property profits (unless furnished holiday letting), so in the second example you should just have £18k income.

You then take off your personal allowance (2008/09 - £5,435) to get £12,565. This leaves you with £23,435 remaining in the basic rate band, but note that this represents the gross dividend you could draw to just stay in the basic rate band (i.e. dividend received + 1/9th notional tax credit), so the dividend you actually draw would be £21,092.

Thanks for clarifying that. I didnt' realise I couldn't deduct if it's not holiday let. Makes the whole question go away in a sense, although good to know income is net of costs. I also dit' realise that the 36k was on top of your personal allowance!

Thanks a lot!