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Calculating tax efficient dividend

Hello everyone,

My total "taxable pay" for the 2011/2012 tax year is £28,212.36. (I've already had my paycheck dated 31/03/2012 so this is figure is certain).

I run a side business as a Ltd company so I need to know how much dividend I can take without hitting the 40% income tax bracket. My accountant has told me to take a £5k dividend (i.e. BACS £5k from company account to personal account before year-end). I expressed surprise that £5k is a very round number but he held firm.

Firstly please could you tell me what the correct figure is for the dividend (i.e. the amount of the BACS transfer) as I think he's being massively conservative? (I don't have any extra income sources other than the "taxable pay" above and this one-off dividend)

Secondly should I be looking for a new accountant or is his advice reasonable?

Many Thanks,

Stu

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28th Mar 2012 08:04

£12.500

12,500 to the nearest £500.  This grosses up to 13,889 giving you total taxable income of 42,101 compared to 42,475 which is where higher rate tax kicks in BUT

Your company must have retained profits AFTER corporation tax of 12,500 to enable this dividend to be legally declared.  Note also there may be other factors your accountant is taking into account.

But providing none of these other issues apply then I agree with you and I would have already booked the 12,500!

 

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avatar
By occca
28th Mar 2012 07:18

Agree with Mr Mischief

mr. mischief wrote:

12,500 to the nearest £500.  This grosses up to 13,889 giving you total taxable income of 42,101 compared to 42,475 which is where higher rate tax kicks in BUT

Your company must have retained profits AFTER corporation tax of 12,500 to enable this dividend to be legally declared.  Note also there may be other factors your accountant is taking into account, such as a potentially overdrawn loan account.

But providing none of these other issues apply then I agree with you and I would have already booked the 12,500!

 

 

As to whether or not you need a new accountant, only you can decide

Are you happy with him in other ways?

Ask him why he said only £5,000 - after all he has all the information available to him

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By DMGbus
28th Mar 2012 08:46

Other factors

To answer the question correctly there are several other pieces of information required...

# Benefits in kind from main job

# Benefits in kind from own company

# Interest received

# Other dividends received

# Rental income received

# Any other income received over and above and salary already mentioned

# Payments into pension scheme(s)

# Gift aid payments

# Any other tax allowable outgoings

# Available after tax profits in your own company

Before assuming that your present accountant is incorrect the above vital information is necessary to be considered.

 

 

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