Currently i get paid mainly through dividend . And its not paid through PAYE .? Ive just completed my tax return and paid the amount due on 31st Jan etc .
I just wanted to know a ball park figure on personal tax if i was to pay myself 120k dividend .
Right, I had failed to mention dividends which as you know are charged at a notional 10%, but in your hands give you a tax credit. However, if your income goes into higher tax brackets then it is grossed up for tax. Dividends are not available as a charge against profits in the CT computation. If you paid yourself 125K the first effect would be that your personal allowance for Income Tax (IT) purposes would be lost. Assuming no other income flow the full amount would be taxed at 20% for the first GBP 32010 and 40% thereafter. I compute the tax charge to be of the order of GBP 43598. There would be the tax credit of the 10% of the dividend to offset this. The bill will be fairly hefty, but it can be mitigated substantially through pension contributions. Beware though, pension contribution levels are set against salaries not against dividends. You are in danger of allowing HMRC to push the biggest shovel they can find into both your company's CT and your IT positions. You must seek independent financial advice, it could save you and your company a small fortune in tax.