Tax rate on dividends

squeekyduck

It is my first year end for my ltd company on the 28th Feb and I am arranging my dividends.
I want to know if there is a specific tax rate for dividends or is it added to an individual’s tax credits?
I spoke to my accountant and he said that whatever I want as dividends I need to take out double because essentially the tax rate is roughly 50%, is this through? I don’t want to lose my turn over to 50% tax especially since I have only been paying myself minimum wage for only the past 6 months and I have been paying tax on this too.
I know in the UK the tax on dividends is 10% up until £33,000 but alas this is not the UK!!

nompere

Talk to your accountant again.

Dividends are subject to 20% withholding tax, but the gross figure is taxed on the recipient, if he is an individual, at up to 50% or thereabouts, depending on his personal circumstances. The income tax is then reduced by the tax credit.

As a general rule, and there are exceptions, it usually costs less in tax (taking the company and the shareholder together) to pay higher salary and no dividends, because salary is deductible in computing corporation tax, whereas dividends aren't.

Again, as a general rule, if your accountant hasn't pointed this out, ask him why!

dogsears

nompere wrote: »

As a general rule, and there are exceptions, it usually costs less in tax (taking the company and the shareholder together) to pay higher salary and no dividends, because salary is deductible in computing corporation tax, whereas dividends aren't.

This. As a result of this point, smaller companies, especially owner managed companies, almost never pay dividends.

Mr. Incognito

Don't pay Dividends.

You will suffer Corp tax THEN income tax on it.

Just increase your salary.

There are only two ways to extract money from a company, dividends or salary. Dividends are not tax efficient.