DLA v Div now

[Scrag Meister]

My personal income at the moment is sat at the high tax threshold.

I have just moved house and need to do some work, is it permissible to take a 20k DL and repay with 4% BIK interest come April via a dividend then?

Rather then paying 20k + a third in tax via a dividend now.

[northernladuk]

Not wanting to dig in to your personal affairs won't that leave you with 20k less income next year presenting another problem and so on?

[Maslins]

What NLUK said...add to that the fact it looks like dividends are going to be taxed more heavily next financial year.

Never really understood taking a director loan only to dividend to clear next year. If you fully anticipate your income next year will be lower, ok, it can make sense. If you anticipate trade to continue broadly as is, then it's just kicking the tax can up the road, with extra hassle, interest, and potentially things like S.455 if you muck up your timings.

My view, you're earning well enough to be a higher rate taxpayer, accept the tax and enjoy the extra money.

[Project Monkey]

What NLUK said...add to that the fact it looks like dividends are going to be taxed more heavily next financial year.

Never really understood taking a director loan only to dividend to clear next year. If you fully anticipate your income next year will be lower, ok, it can make sense. If you anticipate trade to continue broadly as is, then it's just kicking the tax can up the road, with extra hassle, interest, and potentially things like S.455 if you muck up your timings.

My view, you're earning well enough to be a higher rate taxpayer, accept the tax and enjoy the extra money.

+1

[ASB]

It's permissible, but possible can kick as mentioned. A more appropriate loan size (given the regime gets less benign next year) would probably be the higher rate threshold less your anticipated income requirements and take the pain on the rest as a dividend this year.

It seems as though you might actually need an income at the higher threshold anyway though, in which case the can kick will simpky cost you money overall.

[TheCyclingProgrammer]

Agree with everyone else - if you just want to take some of your normal dividends up to the higher rate threshold *early* then a director's loan and re-pay at the beginning of the next tax year makes sense but otherwise, as Maslin's says, you're just deferring the point at which you end up paying higher rate tax.

Given the changes to dividend tax rates next year you would be far better taking the £20k out of the company now rather than in April.

[Scrag Meister]

Cheers all.

[Contreras]

Never really understood taking a director loan only to dividend to clear next year. If you fully anticipate your income next year will be lower, ok, it can make sense. If you anticipate trade to continue broadly as is, then it's just kicking the tax can up the road, with extra hassle, interest, and potentially things like S.455 if you muck up your timings.

Well yes, but with contracting the next year can always be lower. We have an current (5-page) thread re extended benchtime.

The OP could consider splitting it £10k + £10k, which would simplify the admin and consequent liabilities. What they must avoid is taking a loan with the possibility of not being able to repay it.