1. Are my principles correct?
2. Is it always best to take a dividend at the £11k ish?
Thanks in advance.
Replies (34)
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If you are earning "£100k" and you don't have an accountant, it's your sanity I'd be concerned about rather than your principles.
So in short you don't know?
Oh, very junior school playground of you.
I spent years getting an accountancy qualification and experience. I didn't realise you could get all you needed to know about complex tax and personal finance decisions from an Excel spreadsheet.
Profit extraction is one of the most complicated calculations we do.
Depending on your circumstances, the best salary to take might be £0, £8,000ish or £12,000ish. Or another number.
With a potential income of £100,000, I refer you to my learned colleague, A.
Not sure what you are trying to do but you need to adjust for NI on salary above £8,424, the dividend allowance is currently £2k and tax on dividends is paid out of previously taxed profits so the rate is 6%.
I would assume that any accountants working in practice would need to perform this exercise each tax year.
Indeed they do.
Based on information specific to individual clients, who realise that the knowledge required to do this is valuable and hence pay them for that advice.
Not for cheapskates who reach for cheap insults the moment someone doesn't want to hand out valuable advice for free.
AWeb - why is Matrix’s post in the ‘to be reviewed for naughtiness’ pink? Not sure what he’s said to put the system’s back up ...
AWeb - why is Matrix’s post in the ‘to be reviewed for naughtiness’ pink? Not sure what he’s said to put the system’s back up ...
Is it a Breast Cancer Awareness thing ?
Your CT looks incorrect re company, you assume taxable profits of £84,000 which means you assume £16,000 tax deductible costs, yet no salary through as no NI recorded.
Your company one, with no salary, is:
Profits 100,000
CT @ 19% 19,000
Dividends £81,000
Tax on dividends 11,850 @0%= 0
Tax on dividends 2,000@0%=0
Tax on dividends 32,500 @ 7.5% =2,437.50
Tax on dividends 34,650 @32.5%=11,261.25
Personal tax therefore 13,698.75
Total tax £32,698.75
But I can improve on that by paying a salary of say £8,424
In that case
Profits 91,576
CT 17,399.44
Dividends 74,176.56
Then balance PA 3,426 @0% is 0
Band 2,000 @0% is 0
Then £32,500 @ 7.5% 2,437.50
Then 36,250.56 @32.5% 11,781.50
Total tax £31,618.44
Your employee one ignores employer NI and needs reworked for correct allowances/ bands
Your self employed one needs reworked for correct allowances/bands
1. Where does £11k come from? Has the PA dropped?
2. You’re assuming AE Opt-out, should you?
3. Salary of £8,424 or £11,850 may be most efficient (or any other figure - you don’t have enough specific information to know).
4. Are there spouses / family members available to use allowances, maybe with alphabet shares?
Your spreadsheet is too generic, too basic and (see #1 & other comments re div allowance) wrong.
Don't forget your self employed example neglects the fact that tax over 1k attracts POA in first year, so expect to pay double.
The one piece of information that I always procure is the client's state pension situation. On the basis that the majority of clients have yet to collect a full book of stamps I'd put through £8,424 as a salary to both accrue another year's pension and to maximise CT relief.
The odd few take the full personal allowance (if the employers allowance is available) since the additional CT saving exceeds the employees NI.
Perhaps the OR is over pensionable age and doesn't pay NIC
The only true way of getting the answer is pay an accountant for advice
Perhaps the OR is over pensionable age and doesn't pay NIC
The only true way of getting the answer is pay an accountant for advice
No, no. I'm sure the OP will know that, Bernard.
It's not qualifications that matter - it's knowledge! Qualifications help but not necessarily.
You've cut off the rest of the "limitations" list so I can't really say how accurate the spreadsheet is.
Other than that, and all the wrong figures, it's pretty good.