Dividend Tax - UK

[jezzaaa]

Hi All,

Just a quick question about Dividend Tax to make sure I've got this correct. Because it seems too good to be true.

After years of being an IT contractor and being made to feel guilty by HMRC for paying myself partially in dividends, I find now that I have a stream of dividend income which isn't directly related to my effort and for which IR35 doesn't apply. And so I can take it without a salary.

Leaving aside any implications of not paying any NICs (I would do voluntary contributions) ... I found a calculator on a contractor site....and when you put in £0 salary and £50,000 dividend, the resulting tax bill for the year is just £2700. A bit more next year for when Mr Sunak adds the extra 1.25% on.

Is that correct? Do you only pay 7.5% on dividends above the tax free allowance and below £50k? There's no 22% rate on any of it?

Thanks all,

Jezzaaa.

[anonymous-user]

£12570 personal allowance.
£2000 dividend tax allowance.
£35430 at 7.5% tax.

[Imasurv]

Rufus Stone said:

£12570 personal allowance.
£2000 dividend tax allowance.
£35430 at 7.5% tax.

This. Min salary upto either nic threshold (about 8.5k) or tax threshold (12.5k as above) and rest in dividends. In terms of personal tax it’s pretty efficient compared to paye but the gap has closed considerably and when you consider whether any corporation tax is paid on profits that’s where they claw it back.

[UpTheIron]

As alluded to above, you would be better to take a small salary up to the NI threshold, that way you'll get your stamp without the need for voluntary contributions.

[bristolbaron]

Important to not forget the corporation tax if paying through a ltd.

[Countdown]

jezzaaa said:

Hi All,

Just a quick question about Dividend Tax to make sure I've got this correct. Because it seems too good to be true.

After years of being an IT contractor and being made to feel guilty by HMRC for paying myself partially in dividends, I find now that I have a stream of dividend income which isn't directly related to my effort and for which IR35 doesn't apply. And so I can take it without a salary.

Leaving aside any implications of not paying any NICs (I would do voluntary contributions) ... I found a calculator on a contractor site....and when you put in £0 salary and £50,000 dividend, the resulting tax bill for the year is just £2700. A bit more next year for when Mr Sunak adds the extra 1.25% on.

Is that correct? Do you only pay 7.5% on dividends above the tax free allowance and below £50k? There's no 22% rate on any of it?

Thanks all,

Jezzaaa.

Bear in mind it should already have had Corporation tax paid on it @19%.

[Eric Mc]

The taxation of dividends is nowhere near as generous as it used to be.

[troika]

bristolbaron said:

Important to not forget the corporation tax if paying through a ltd.

Indeed. This is conveniently forgotten by many who label people paid in divs as ‘tax dodgers’. Not long until corp tax goes to 25%, ouch!

[Countdown]

troika said:

bristolbaron said:

Important to not forget the corporation tax if paying through a ltd.

Indeed. This is conveniently forgotten by many who label people paid in divs as ‘tax dodgers’. Not long until corp tax goes to 25%, ouch!

Would "NI dodgers" be a more accurate label?