Income tax calculation

[gbonner]

At the start of this financial year I was with an umbrella company and up to June I earned £26,500 and paid approx £8,000 inc tax and £1,300 NI.
I have since set up a limited co and have paid myself £19k in dividends (excluding tax credit) and I wont pay any further salary this year.

The way I see it I have over paid inc tax on the salary by approx £4.5k, so any dividends I pay myself to take my total income over the £41k threashold, the income tax on it should be dividends * 0.25 - £4.5k.

Anyone able confirm if this would be the right approximation?

[Craig at Nixon Williams]

That looks about right!

If you don't go over the HR threshold then you will get a refund of £4,500 when you file the self-assessment for the year.

If your Gross income does go over the HR threshold then the tax is 25% of the Net dividend but in your case you can get a tax liability of ~£4,500 (based on what you are saying) before you will actually need to pay anything.

Hope this helps!
Craig

[northernladuk]

Anyone able confirm if this would be the right approximation?

yes, your accountant can.