checking div calcs

[Olly]

Just used an online calculator and wanted to quickly check all's ok please:

Tax code 747L
Salary from Ltd = 7072 gross
Interest from bank savings = 3650.13 gross
Max dividend to minimise personal tax = 28580

How does that sound pls?

[northernladuk]

Just used an online calculator and wanted to quickly check all's ok please:

Tax code 747L
Salary from Ltd = 7072 gross
Interest from bank savings = 3650.13 gross
Max dividend to minimise personal tax = 28580

How does that sound pls?

According to my SJD divi planner that leaves you 176.34 to pull out so can treat yourself in your last divi.. This will change in 5 days or so after the budget however.

[Waldorf]

Just used an online calculator and wanted to quickly check all's ok please:

Tax code 747L
Salary from Ltd = 7072 gross
Interest from bank savings = 3650.13 gross
Max dividend to minimise personal tax = 28580

How does that sound pls?

I just used this calc and got a similar figure to you, so it sounds ok. Contractor Accountant specialists UK | Accountancy Service for contractors | Interim Managers Accountancy Services UK | Take Home Pay Calculator UK.

The tax rates have been announced for next year, so unless Osborne changes his mind they will be as follows:

2012-13 NIC Rates, 2012-13 Income Tax Rates, Personal Allowance

[Clare@InTouch]

Just used an online calculator and wanted to quickly check all's ok please:

Tax code 747L
Salary from Ltd = 7072 gross
Interest from bank savings = 3650.13 gross
Max dividend to minimise personal tax = 28580

How does that sound pls?

Take the higher rate limit of £35,000 and add on your tax code to give your higher rate limit = £42,475.

Deduct your salary and bank interest to get £31,752.87. Divide by 10 and x 9 to get the maximum net dividend = £28,577.58.

Anything over that amount will result in a tax bill equal to 25% of the excess, so take £29,577.58 and you can expect a tax bill in January next year of £250.

[Olly]

Ta very much gorgeous Clare...you are gorgeous aren't you?

[Clare@InTouch]

Ta very much gorgeous Clare...you are gorgeous aren't you?

Of course :-p

And you're welcome :-)

[Contreras]

Alternatively, reduce salary to £5,304 and up dividends to £30,168.78 for an extra take home of £177.

[Olly]

Alternatively, reduce salary to £5,304 and up dividends to £30,168.78 for an extra take home of £177.

how does that work then?

[Contreras]

how does that work then?

I'm not sure exactly! Perhaps an account could explain it better?

Gross interest from personal savings of £3650.13 and personal allowance of £7475 means you will pay income tax (20%) on any salary above £3824.87. Reducing the salary therefore reduces income tax although it increases corporation tax (also 20%) by an identical amount. Then, if you pay out dividends up to max allowed before higher rate income tax this results in the same total net personal income + company retained profit.

By some wizardry of accounting and the difference between tax on dividends and basic rate income (10% vs. 20%) you end up with an extra 10% of the difference (7072-5034) in pocket before being liable for higher rate income tax. Either that or my spreadsheet is lying to me.

[Clare@InTouch]

There is a 10% tax savings band that means a lower rate on interest as long as your non-savings income (ie not dividends) is below £10,035. Have a read here:

The 10% starting rate for savings income « TaxAid