High Rate Taxpayer consequences
Discussion
As a ltd co director I have historically kept my salary / div mix just under the high rate band as my accountant advises but with the new div tax rules coming into play and with me needing a new mortgage in the new year i'm thinking of maximizing my take-home this tax year. I just don't really see what negative impact being a high rate payer would be.
I know that interest on savings is affected (although my investments are in ISA) but I can't see what else would really be affected. I have no dependents, no company car, the business pays my pension....am I missing something?
I know that interest on savings is affected (although my investments are in ISA) but I can't see what else would really be affected. I have no dependents, no company car, the business pays my pension....am I missing something?
Ozzie Osmond said:
What is the "high rate band"?
Many company directors tick over on a very low salary just under the National Insurance threshold and take everything else as dividend.
At the other end of the spectrum if took home £100k last year and push that to £200k this year you will simply pay 5% additional tax on the last £50,000 - i.e. pay tax of £2,500 but get your hands on a lot more cash.
I'm referring to the 40% tax band. I've always kept just below by taking home circa £42k or so out of the business therefore avoiding the additional div tax over and above. I'm just looking to see if it affects me in any other way other than paying the additional tax. Many company directors tick over on a very low salary just under the National Insurance threshold and take everything else as dividend.
At the other end of the spectrum if took home £100k last year and push that to £200k this year you will simply pay 5% additional tax on the last £50,000 - i.e. pay tax of £2,500 but get your hands on a lot more cash.
Jockman said:
Indeed, though OP states the Company pays his pension so it can pay the full £40k Annual Allowance regardless of his Dividend / Salary mix.
Op - your Mortgage Provider will need to see the last THREE years SA302s Self Assess calculations and will calculate an average of the 3. I assume you are an owner of the Company so it will need 3 years of Accounts.
Is your wife a Shareholder of the Company? Is she a Director? Do you pay her for her fiduciary duty as such? Is she able to take this payment as a Pension contribution?
I only have two years but I've been advised this is ok for mortgage purposes. Op - your Mortgage Provider will need to see the last THREE years SA302s Self Assess calculations and will calculate an average of the 3. I assume you are an owner of the Company so it will need 3 years of Accounts.
Is your wife a Shareholder of the Company? Is she a Director? Do you pay her for her fiduciary duty as such? Is she able to take this payment as a Pension contribution?
No I'm not currently married and although I've considered making her a shareholder I'd rather wait until we are married. She could do some bits for the business but we haven't really gone down that line.
I guess part of the answer could be that I increase the pension contributions going forwards - although as I'm 30+ years off retirement part of me thinks i'd rather keep that money within the business just in case.
Another thought I had was to use the retained profit to invest into a fund or bond of some kind.
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