Too much tax

Too much tax

Didn't find your answer?

My client and his wife own a company (50% shareholders each). The company makes pre tax profits of say £2M and pays tax at 30% each year, say £.6M.

If £1.4M is then distributed as dividends a further 25% tax is payable by the shareholder, say £350K.

So Client gets £1.05M. Total tax paid £950,000 or 47.5%.

What am i missing! Or is this correct?

Thanks to all

Stormrider

Replies (4)

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By lizmoss
13th Nov 2007 13:40

That's correct!
Yes, you're right!

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By User deleted
13th Nov 2007 16:51

Too profitable
That is the problem with Limited Companies when profits exceed the lower rate band. It is usually more tax effective to operate as a company up to that point but not when well over that

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By User deleted
14th Nov 2007 06:44

take a salary
In this scenario, drawing a salary to reduce profits down to the 20% bracket is probably better than a divi.

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By User deleted
14th Nov 2007 18:43

Thank you
Thanks to all who commented.

I know i shouldn't have incorporated my practice!

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