Other Income and Dividends

[banchini]

Hi,

New to Ltd and ideally would like to be fully armed with as much knowhow before speaking to accountant to gauge his/ her advice.

My understanding of the dividend tax calculation is follows:

Assumes 2011/12 and Higher Earner:

Higher rate threshold = £42,475

Total Gross earnings = PAYE Gross + (£Dividend/.9)

Tax = (Total Gross earnings - 42,475) * 22.5%

So general question in terms of Self Assessment....

Is the PAYE taxed separate also?

If I have additional income e.g. Rental how is this factored into the Dividend tax equation and will it get taxed separately?

Thanks in advance
Banchini

[Clare@InTouch]

PAYE is taxed month by month, so just include the gross in your calculations - any tax & NI due will be deducted by your employer and paid as you go.

Rental profit will be the same as wages, so:

Higher rate limit less gross wages less rental income less gross bank interest less any benefits from your P11D = gross available dividend. Divide by 10x9 to get the net dividend.

Anything you take above that net dividend figure will result in tax equal to 25% of the net (which equates to 22.5% of the gross).

Remember payments on account too if this is your first year. If your tax due is over £2,000 then you'll pay the total amount due on 31st January, plus 50% on account for next year, plus a further 50% in July.