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Dividend Vouchers ?.

Hi,

With the new HMRC Business Records check coming up real soon I am reminded that I haven’t done any Meeting Minutes and Dividend vouchers for several years now (naughty boy I know, and a bit embarrassing).
The bit I don’t understand is, say I withdraw £3000.00 (as Dividend in my mind) and spent it all. When it come to the tax on this, is the tax part of the £3k i.e. I now need to make provision for this tax from my ‘personal’ money or is it on top ? i.e. still owed from the business account ?.
The dividends are taken several times a year and irregulay amounts.
So, I need to work out how to fill these figures on the Dividend Vouchers, I was thinking of a spreadsheet that will allow me to put in the Dividend amount drawn and have it work out the tax credits and net figure.
My earning (Salary plus Divvies have been in the range of £65k) – how do I account for the extra tax ?.  is it from personal monies or is it the business that pays it ?.
I think I understand that the 1st 10% of divvie tax is covered in the Corporation tax, right ?, So, I don’t need to pay it separately. Its only the tax above and beyond this 10% that I need to pay – when is that due ? I have been making payments on account – I presume the extra tax due is in that right ?.
I must understand this, so please be gentle – layman’s terms as much as possible.
 
Thank you very much for any help you can provide.

(1 Man ltd company).

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27th Jun 2011 10:38

Tax return?

The 10% is a notional tax, and additional tax will be due if it is liable to higher rate tax. The dividend received is considered to be net dividend, and the grossed up dividend is used for calculations of personal tax.

What have you been putting on your SA tax return? If you don't understand gross/net dividend (and it seems not, as the 10% is nothing to do with corporation tax) then all your SA returns may be wrong. You may have a bigger problem than you realise!

EDIT: Who is doing your accounts and corporation tax? If you have an accountant ask them to explain. If you do the accounts/CT yourself, then your lack of knowledge is quite worrying!

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By Monsoon
27th Jun 2011 12:21

Dividends

Ltd Co makes profit

Pays CT on that profit

Remaining profit after tax can be distributed as a dividend.

This dividend is NET of the 10% tax credit

E.g.

Profit £10,000

CT paid £2000

Retained profit £8000

Dividend paid from company to shareholder £8000

The shareholder has actually received £8888.88, less the £888.88 tax credit. The £888.88 never gets paid, it's notional.

To calulate gross dividend it's £8000 x (100/90) = £8888.88

Gross dividend is the shareholder's income when assessing how much income they've had and therefore whether they are a higher rate taxpayer or not.

Higher rate tax is 25% of the Net dividend recieved (32.5% of the gross, less the 10% tax credit: so it's easier to express as 25% of net!)

 

 

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