Post Dividend Payments

[Cogcog]

I was wondering what small (very small; husband and wife) businesses were doing since they chnaged the rules around share dividends?

We had traditionally taken a small salary and then paid myself share dividends each year but that doesnt feel as sensible as it was now the rukes have changed.

I am wondering if I should just take a salary and have done with it or if there is another way?

[chandler99]

Taking divi's still seems to be the best option, but would suggest you speak with your accountant.

[Cogcog]

chandler99 said:

Taking divi's still seems to be the best option, but would suggest you speak with your accountant.

TBH I find accountant-speak incomprehensible. Of all professions they seem unable to articulate in words I can understanmd. I may just be very stupid.

[PurpleMoonlight]

Dividends is still cheaper than employee and employer NI

Do £8000 PAYE salary and the rest dividends.

Personally I am reducing my dividends to £5000 and making pension contributions instead now.

[Eric Mc]

Cogcog said:

TBH I find accountant-speak incomprehensible. Of all professions they seem unable to articulate in words I can understanmd. I may just be very stupid.

A slur on the profession - but probably accurate.

Essentially, taking dividends, on the whole, will still be better value than taking it all as salary - but not as good value as it used to be.

[Bigbox]

My loose understanding is that if you were to take up to what was the higher rate of tax then you'll have to pay an extra c£2k in tax

[Eric Mc]

Dividends between £5,000 and the point where Higher Rate tax starts will be taxed at a special dividend rate of 7.5%.

[PurpleMoonlight]

Bigbox said:

My loose understanding is that if you were to take up to what was the higher rate of tax then you'll have to pay an extra c£2k in tax

Disgusting isn't it.

If he has put the basic tax rate up from 20% to 25% there would have been riots. But sneak a similar increase on business owners who are likely creating jobs for others and nobody bats an eyelid.

In my opinion this will seriously impact the economy and employment in the long run.

A very poor move by a conservative government.

[Eric Mc]

Or pay yourself a salary and have done with it.

[PurpleMoonlight]

Eric Mc said:

Or pay yourself a salary and have done with it.

Or work for someone else and have none of the worry and risk.

[Eric Mc]

I was being a bit facetious. HMRC on the whole does not really see why those taking risks should be rewarded by allowing them to manipulate their taxes.

[PurpleMoonlight]

The Government should create a balance between the need to create jobs and grow the economy with tax revenue.

In the 2015 budget literature the government claimed they believed there was still a fair balance of this. I disagree. The incentive to establish a business and create employment for others has been significantly reduced.

[Eric Mc]

There is no exactness to what is "fair".

[singlecoil]

PurpleMoonlight said:

The Government should create a balance between the need to create jobs and grow the economy with tax revenue.

In the 2015 budget literature the government claimed they believed there was still a fair balance of this. I disagree. The incentive to establish a business and create employment for others has been significantly reduced.

I should imagine there are very few people who start businesses in order to provide employment for others. In the main they do it for the various advantages they see in it. Employing other people is a necessary evil, not the reason for starting a business.

[PurpleMoonlight]

singlecoil said:

I should imagine there are very few people who start businesses in order to provide employment for others. In the main they do it for the various advantages they see in it. Employing other people is a necessary evil, not the reason for starting a business.

I agree that their primary reason is likely an income for themselves. But if the government significantly reduces that income to close to what they would receive if employed then they are less likely to, and by default there will be less jobs created for others.

The economy will suffer because of the dividend tax, I am sure of it.

[malks222]

Cogcog said:

TBH I find accountant-speak incomprehensible. Of all professions they seem unable to articulate in words I can understanmd. I may just be very stupid.

as others have said its still looks the best (eg most cost effective) option to still pay small PAYE salary (up to tax/ni threshold) and just suck it up that we now have to pay extra tax on the dividends we take.

you could route all your cash through PAYE to yourself and the wife, but you'll pay more tax this way.

depending on how much you need/ want to pay yourself, there may be other advantages to upping pension contributions, but need to speak to accountant for that.

[singlecoil]

PurpleMoonlight said:

singlecoil said:

I should imagine there are very few people who start businesses in order to provide employment for others. In the main they do it for the various advantages they see in it. Employing other people is a necessary evil, not the reason for starting a business.

I agree that their primary reason is likely an income for themselves. But if the government significantly reduces that income to close to what they would receive if employed then they are less likely to, and by default there will be less jobs created for others.

The economy will suffer because of the dividend tax, I am sure of it.

That presupposes that the new business is actually going to create extra economic activity out of thin air, whereas in fact it will simply move turnover from one company to another.

[Terminator X]

chandler99 said:

Taking divi's still seems to be the best option, but would suggest you speak with your accountant.

This although you'll need to find 7.5% Divi Tax this year that you didn't pay last year. Pain in the arse quite frankly esp if x2 for husband and wife. No doubt the PAYE crew feel our pain

TX.

[Terminator X]

PurpleMoonlight said:

Bigbox said:

My loose understanding is that if you were to take up to what was the higher rate of tax then you'll have to pay an extra c£2k in tax

Disgusting isn't it.

If he has put the basic tax rate up from 20% to 25% there would have been riots. But sneak a similar increase on business owners who are likely creating jobs for others and nobody bats an eyelid.

In my opinion this will seriously impact the economy and employment in the long run.

A very poor move by a conservative government.

I'll bet the majority have yet to realize. Come the day of the first payment it may be a different story, 2017 afaik.

TX.

[berlintaxi]

Terminator X said:

PurpleMoonlight said:

Bigbox said:

My loose understanding is that if you were to take up to what was the higher rate of tax then you'll have to pay an extra c£2k in tax

Disgusting isn't it.

If he has put the basic tax rate up from 20% to 25% there would have been riots. But sneak a similar increase on business owners who are likely creating jobs for others and nobody bats an eyelid.

In my opinion this will seriously impact the economy and employment in the long run.

A very poor move by a conservative government.

I'll bet the majority have yet to realize. Come the day of the first payment it may be a different story, 2017 afaik.

TX.

If you were in that position you must have a st accountant, first thing most did was email clients with a briefing if the changes and its potential effect on tax bills.