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)
Please login or register to join the discussion.
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
take a salary
In this scenario, drawing a salary to reduce profits down to the 20% bracket is probably better than a divi.