dividend questions

[meuk]

Hi

I am a sole contractor, with my ltd company. i wonder if you can offer some advice

1) Is it perfectly acceptable to pay yourself the minimum yearly salary for tax, and the rest in dividends (as long as their is profit of course)?

2)
if my profit looks like this:
jan: £3000
feb: -£20
mar: £0

if i only pay myself £1000 dividend in jan, and i still allowed to pay myself a dividend in feb? even though there is no profit in feb, the dividend paid in jan is 1000 out of a possible 3000. can it carry forward like that?
is the main thing to make sure the dividends over a year don't exceed the profit? does it really matter when you pay yourself a dividend and if there is a profit on a monthly basis?

3)
is monthly profit bases on the invoice dates, or when you are paid.

e.g in jan i send out two invoices total of £3000, but the money received in jan is only £1000. the remaining £2000 is paid in feb.

does that mean the available income (towards profit calculations) is
jan £1000
feb £2000

or
jan £3000
feb £0

if that makes sense?

many thanks

[Accounting Sage]

Meuk,

You can pay minimum yearly salary to yourself(minimum wages do not apply for directors). Dividends could be paid out of profits.You can set up a directors loan account through which you can withdraw the sums. Dividends are taken from yearly profits. There is no need to account for monthly profits.

It will be good if you can consult your accountant. As he/she will be able to advice you expenses that you can claim such as home working expenses etc.
You will be able to save more than you pay and will also have peace of mind for a small fees.


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Accounting Sage Limited

[ASB]

1) Yes.

2 and 3) Suggest you get a basic accounting book or similar. Profit is based on accounting periods, these are normally 12 months but can under certain circumstances (and provided compainies house are informed) be extended or shortened.

Profit is the cumulative excess of income over expenditure. Income is booked when the work is done (i.e. accounts are prepared on an accruals basis). Thus in your example 2) you could "carry forward". In you example 3) Then it is nominally 3000 available - though you don't actually have the cash to pay it.

Also you need to consider taxation. You can only distributed after tax profits. Thus it is important to know what your overall liabilities and not pay dividend that exceeds that.

Hopt this is some help.