Silly share question
Discussion
aceparts_com said:
Maybe the 100K was a over quoting the facts but for simplicities sake.... Basically person B doesn't need this money and he'll get taxed at 40% but maybe next year things will be different with his income.
You don't pay tax at 40% on dividends. It's effectively 32.5%. There are NI savings, too, especially for the company.
Dividend income which falls into the Higher Rate Tax band is taxed at 32.50% rather than the normnal 40%. There is no NI liability either.
If the shareholder does not want to "draw" his dividend entitlement, he can waive all or part of the amount due to him. Please note that, once waived, the entitlement to that particular payout is lost forever. Do you really want to do this?
If the dividend is allocated to the shareholder's "Directors Loan Account" (assuming he is also a director), rather than a cash amount being drawn from the company bank, the dividend is "deemed" to have been physically paid on the date it was allocated to the loan account and the relative tax will be due and payable on it.
If the shareholder does not want to "draw" his dividend entitlement, he can waive all or part of the amount due to him. Please note that, once waived, the entitlement to that particular payout is lost forever. Do you really want to do this?
If the dividend is allocated to the shareholder's "Directors Loan Account" (assuming he is also a director), rather than a cash amount being drawn from the company bank, the dividend is "deemed" to have been physically paid on the date it was allocated to the loan account and the relative tax will be due and payable on it.
Problem solved. Found this:
www.pkf.co.uk/web/survey.nsf/DT2006!OpenForm&Seq=1
Tax calculator for owner managed Ltd companies
www.pkf.co.uk/web/survey.nsf/DT2006!OpenForm&Seq=1
Tax calculator for owner managed Ltd companies
Eric Mc said:
Multiply the £50,000 Dividend by the Higher Rate Dividend tax rate of 32.5% to find out how much tax is due.
Of course this isn't the fabulous deal it seems, as the dividend is paid from the company's after tax profits, which (probably in the OP's case) will have been taxed at 19%.
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