If I change from being a sole trader to private limited company do I pay 20% CT on profit and then a further 10% notional tax on dividends. I also have a FT job which pays £35k via PAYE?
System of Law: Northern-Ireland
Hi.A limited company with profits up to £300,000 will pay Corporation Tax at 20%. Dividends carry a notional 10% tax credit so a £900 dividend payment equates £1,000 gross for Income Tax purposes. Nothing is paid to the tax office in relation to the tax credit.The notional tax credit is deemed to settle the shareholder's basic rate tax liability on the dividend and they will only have additional personal tax to pay if their total gross income exceeds £42,475 in 2012/13.Take a look here for more information on tax and dividends.Let me know if you have any further queries.
Thanks So if I make a profit of £15,000 I would have to pay £3,000 CT leaving a balance of £12,000 which I can pay myself as a dividend? Do I then pay tax on this £12,000 after CT profit?Remember I have a job with a company (not this one) where I am paid £35k via PAYE.
If you paid yourself a dividend of £12,000, that would be £13,333 gross with a £1,333 tax credit. Add that to your salary of £35,000 and your total income would be £48,333. The first £8,105 of your income would be tax free leaving £40,228 taxable. The first £34,370 would be taxed at 10 or 20% depending on whether it is salary or dividend leaving £5,858 taxable at 32.5% (the dividend rate) giving rise to a gross liability of £1,904. Deduct the tax credit of £1,333 and you are left with a net liability of £571.
TonyMy salary is with a completely separate company, I work for myself as well as a full time job.Do I add my salary to my profit even though they are different companies or is my salary and dividend different i.e. I pay tax and NI on my £35k and then I pay no tax on the £13,333 as its a dividend and below the £34,370 limit on dividends or if I add them together, should I not be paying 40% on the amount of £34,370?ThanksRick
You take your total income from all sources. You only get one basic rate tax bandWhat would you rather pay, 40% on some of your salary of a net 22.5% on some of your dividend? The allocation of tax rates to income is done to the taxpayer's advantage.TonyTax41085.7405492708
Inc Tax, CGT, Corp Tax, IHT, VAT.
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