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In which year is dividend taxable

Limited company has financial year ended 31/12/08.

Dividend declared July 2009 and paid immediately.

In the shareholders personal returns, is this a 2008/9 entry (because it relates to year ended 31.12.08) or 2009/10 entry because that's the year in which it was paid.

Basic stuff so apologies in advance.

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12th Jan 2010 13:34

Simple

Dividend is income of the shareholder in 2009/10 (and the dividend will be shown in company P&L A/c for year ened 31 December 2009, it does not "relate to the year ended 31 December 2008" if it is declared and paid in July 2009).

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By pawncob
12th Jan 2010 20:41

Time to divi it up!

As David says, dividends are assessable in the year in which they're paid.

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By Anonymous
13th Jan 2010 08:50

Thanks for the replies.  It looks as if this has historically always been done on the basis of a year too early then, but I'm guessing that it doesn't need any corrective action.  Thanks again.

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13th Jan 2010 15:20

it's less simple than that
anally answering........divs are taxable on the EARLIER of :-

when voted,

paid,

received,

credited to directors yacht fund account etc...

the great tax planning opportunity is that if you are under the max for basic rate band, vote a dividend to use it up, and draw it when the cache wanders in later on, as long as you do not get ahead of the company earning the appropriate profit. remember once a BR tranche has gone on 5.4. it's gone!

The rules assume directors just draw massive wedges out all year long and then only pay the tax much later – Shirley not! This means you can vote dividends ahead of taking them to optimise tax fairly easily.

 

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