Higher tax band cos of bonus

[ltdcom]

I paid just enough dividend amount from ltd company to my wife to keep her under higher rate tax band.

Now she got bonus of 4k from her main job in march.

So what will happen now, is she in higher rate tax band and how will she pay or how will HMRC find this out?
Are we screwed???

Also we did share split according to her original dividend calculations. (80:20)

[Clare@InTouch]

If she's got to tax to pay then she needs to inform HMRC, and ask them to send her a tax return. Assuming she's £4,000 into higher rates then you can expect a tax bill of £1,000.

[Nixon Williams]

I paid just enough dividend amount from ltd company to my wife to keep her under higher rate tax band.

Now she got bonus of 4k from her main job in march.

So what will happen now, is she in higher rate tax band and how will she pay or how will HMRC find this out?
Are we screwed???

Also we did share split according to her original dividend calculations. (80:20)

This is sometimes what can happen, you can never get the split exactly right but mainly you can save.

There is another thread related to this in that the poster is considering a change of the shareholding, this is something that we would advise against.

If you are looking to change the shareholdings in the company between yourself and your spouse more than once then you may run into problems if you were to ever be investigated by HMRC as the spousal gift exemption may not apply.

HMRC may try and argue the shares that are being transferred are indeed a right to income because there is the expectation to receive the dividends if the underlying reasoning behind the transfer to ensure one or both shareholder(s) are to remain basic rate tax payer(s).

Alan

[kingcook]

I paid just enough dividend amount from ltd company to my wife to keep her under higher rate tax band.

Now she got bonus of 4k from her main job in march.

So what will happen now, is she in higher rate tax band and how will she pay or how will HMRC find this out?
Are we screwed???

Also we did share split according to her original dividend calculations. (80:20)

WRT avoiding the higher tax bracket, yes - you're screwed.

If there were a way to, say, i dunno make the dividend paperwork disappear somehow and be replaced by some paperwork to do something with a directors loan, then pay the "directors loan" back.

[JamJarST]

Screwed is a bit of a strong term though isn't it?? Yes you will have to pay higher rate tax on the £4k but you have still avoided tax on the other earnings.

[kingcook]

Screwed is a bit of a strong term though isn't it?? Yes you will have to pay higher rate tax on the £4k but you have still avoided tax on the other earnings.

40% of £4K is £1600. That's an all night session with a call girl! Ok... so maybe not quite as screwed as one might have expected

[Clare@InTouch]

40% of £4K is £1600. That's an all night session with a call girl! Ok... so maybe not quite as screwed as one might have expected

If it's a dividend it will be taxed at 32.5% of the gross, less the 10% tax credit, so 22.5%. Which works out to 25% of the net. Or £1,000

So more left in your own pocket for whatever type of night out you want!

[Notascooby]

WRT avoiding the higher tax bracket, yes - you're screwed.

If there were a way to, say, i dunno make the dividend paperwork disappear somehow and be replaced by some paperwork to do something with a directors loan, then pay the "directors loan" back.

Shirely that's the obvious option - but must admit - screwed is hardly what you'd call being 3K richer than you expected!

I wish I suddenly found myself with 4K of cash I didn't expect

[JamJarST]

Shirely that's the obvious option - but must admit - screwed is hardly what you'd call being 3K richer than you expected!

I wish I suddenly found myself with 4K of cash I didn't expect

Spot on! "Oh dear I earned too much"

[Scrag Meister]

If it's a dividend it will be taxed at 32.5% of the gross, less the 10% tax credit, so 22.5%. Which works out to 25% of the net. Or £1,000

So more left in your own pocket for whatever type of night out you want!

WCS.