Advice on dividends

[genius]

Hello

I'm new. Can someone tell me the rules on paying dividends? E.g. if I invoice £10k a month and pay myself a salary of £1k, what dividend can I take each month?

Do I have to always leave enough in the business account to cover corporation tax / dividend tax?

[WordIsBond]

You aren't allowed to pay any dividend at all until you look to the right, see where it says "First Timers", click on it, and read what it says.

[northernladuk]

And people tell me 'speak to an accountant is bad advice.'

[WordIsBond]

And people tell me 'speak to an accountant is bad advice.'

In this case, it probably is. Judging by posting history, this guy is so clueless about running a limited company that he doesn't need an accountant, he needs an umbrella.

[genius]

I've already read this

Limited Company Dividends Guide :: Contractor UK

So on my first month - THIS IS A SIMPLIFIED EXAMPLE! Invoice £10,000, PAYE salary £1,000, expenses £0 .. £9,000 minus 20% corp tax = maximum dividend of £7,200

Is that it? I just do this basic calculation everytime I want to pay a dividend?

Or does it only matter for YEAR END profits? In which case I could take huge dividends in the first few months but decrease them gradually?

[genius]

In this case, it probably is. Judging by posting history, this guy is so clueless about running a limited company that he doesn't need an accountant, he needs an umbrella.

Just started this month. Sorry for not knowing everything.

[WordIsBond]

Just started this month. Sorry for not knowing everything.

OK. In that case, please get yourself a specialist contractor accountant. They will not only tell you the amount, they will tell you how to calculate it, and you won't be relying on a bunch of guys on the Internet whose claim to expertise is that they sound plausible.

Here, I'm an Internet guy, so I'll tell you your calculation sounds about right to me. Now, are you really any better off? I won't be there when HMRC comes knocking if you got it wrong. You'll say, "Oh, this guy, WIB, on the Internet said so!" That will be a fun conversation.

Have you taken into account VAT in your calculation, by the way? Oh, maybe your numbers aren't right after all.

Phone bill? What, you haven't paid it yet? Doesn't matter, if it has accrued it should be included in the calculation. What does "accrued" mean?

If I sound like I'm trying to scare you that you don't know enough to do this on your own, I am.

Good luck with it, and I mean that -- but you probably won't have good luck if you aren't prepared to pay for relatively cheap expert advice to get you straight, at least until you've done all of this long enough to know what you are doing.

[TheCyclingProgrammer]

Your calculation seems broadly correct - you can only take dividends if there is enough retained profit from previous years plus any net profit from the current year. Strictly speaking, in cash flow terms, you don't have to leave enough cash in the bank to cover all outstanding liabilities but it would be foolish not to IMO.

[genius]

My accountant has advised to leave around 20% in the business account which to me suggests it is year end profits that matter rather than any calculated / estimated profits at the point of taking each dividend

So in my first month, I could pay £1k salary and £9k dividend leaving nothing (I'm not going to do so), as long as by year end, my dividends do not exceed my profit. Is that the case?

I understand the general concept over the full year (I THINK!) but I am asking about dividends in the first few months of the company because I don't think the contractoruk guide makes that completely clear.

[NotAllThere]

Just started this month. Sorry for not knowing everything.

I started in contracting in 1995, before the internet was widely available. For this basic stuff, I did guess what? I asked my accountant and got myself informed. When I didn't understand, I nagged and cajoled them until I got an answer. I understood VERY early on that dividend income comes out of company profits. I.e. after expenses, tax, payroll.

You really need to put some effort in, instead of asking clueless lazy questions or you will find yourself in a mess, owing large amounts of money to uncaring government organisations, and no-one to blame but yourself.

If you can't be bothered - either stay permie, or go to a brolly.

Ask intelligent questions and you'll find this place very useful.