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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have a limited company and pay myself £85,000 per year Ive

Resolved Question:

I have a limited company and pay myself £85,000 per year I've been advised to change my salary ti dividends

My question is I would like the breakdown figures for being paid this in dividends and also as paye and an explanation of which would be more benificial for me I am the only share holder of the company
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please leave it with me whilst I do some calculations...

Many thanks
Expert:  taxadvisor.uk replied 3 years ago.
Gary, thank you for your patience..

Here is some comparison of Salary at £85,000 vs. Salary at £7,680 and dividend payment of £70,000

Comparison - salary vs. Dividends
Gross salary £85,000
SALARY Amount
Gross pay 85,000
Tax free allowance 9,440
Total taxable 75,560
Tax due 23,822
National insurance 4,915
Total deductions 28,737
Net earnings 56,263
Employers NI 10,668
SALARY Amount
Gross pay 7,680
Tax free allowance 9,440
Total taxable -1,760
Tax due 0
National insurance 0
Total deductions 0
Net earnings 7,680
Employers NI 0
Dividends paid
Net dividends 70,000
Tax credit 7,778
Taxable gross 77,778
Total taxable income 85,458
Tax free allowance 9,440
Total taxable 76,018
Tax payable
Dividends eligible for 10% rate
£32,010 3,201
Dividends liable to higher rate tax
£44,008 14,302
Total tax due before deductions 17,503
Dividend tax credit 7,778
Total tax due 9,725
Company will pay additional CT as
dividends are distribution of taxed
profits
Original salary and NI 95,668
Revised salary and NI 7,680
Additional profit 87,988
CT at 20% 17,598
TOTAL IT, NI and CT
Original 39,405
Revised 27,323
Savings 12,082

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


Customer: replied 3 years ago.
So the total tax I will pay if I'm on dividends will be £17,000 per year...?

But the company will have to pay around £17,000 in CT but it will save on paying any national insurance..?
Expert:  taxadvisor.uk replied 3 years ago.
Gary, thank you for your reply.

As it is your own company, I was looking at the total cost of all taxes and NI.

The total tax you would pay is £9,725 after getting a tax credit of £7,778 being 10% of gross dividends (It's the dividends at higher rate of 32.5% less tax credit at 10%).


Your savings in the main are coming from not having to pay Employer's NI.
I hope this is helpful and answers your question.
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.

Gary, I thank you for accepting my answer.

Your reward of a bonus is greatly appreciated.

Best wishes.

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