Prospective Ltd Co client owner / director has asked if she can do following :
"Can you check/verify tax situation on any dividend we would propose/pay from the Company
Proposed dividend of £25k per shareholder
For current tax year (2021/22)-My understaning is each individual would have an annual allowance of £2,000 then pay 7.5% on remaining £23,000 if their individual gross annual income fell in to the basic tax bracket (shareholder directors paid £21k pa each ; one of directors owns one of the regional offices personally and rents to Co for £6k pa)
Allow £ 2,000
Taxable £23,000 @7.5% = £1,725
Net receipt per shareholder £23,275
Additional cost to company in Corporation Tax per shareholder = 19% of £25,000 = £4,750
Overall cost to company per shareholder = £29,750
They have said that they had a shareholder's / Directors meeting pre 31.3.21 (Co YE) and voted the above dividend through but have not paid yet.On that basis if the Co were to pay these dividends before 31.12.21 - would this be within the financial year 20/21 and tax year 20/21 and the director's and Co would have to account for the income tax & corporation tax in 20/21 , with the director's paying any additional tax in their SA return by 31.1.22 and Co paying corporation tax by 1.1.22 ?
Is above correct ?
Would there be any pros or cons having the dividends in one year or the other (ie 20/21 or 21/22) other than pushing the corporation tax liability & income tax liability to a year later if were in current year (21/22). Also, 2 of the directors have children under 16 : would above have any implications on the child benefit higher income tax charge ?