Thanks for this, I think I've probably had some bad advice somewhere along the line but can I just check;
I was told to set up my own ltd company and invoice through that for my FD role. I will pay 20% corporation tax on my profits after which I can then pay myself a dividend. Will I then pay the 32% tax (or what ever it works out at) on that too? Can't see how I will be better off than if I was just PAYE paying 40%?
To give you some figures, for the last tax year I took home £28k as a sole trader and then got dividend income of £15k. This year I will likely fall into the higher rate tax rate bracket for PAYE so would I be better leaving my dividends in the company if I can rather than paying 40% tax?
Nor Kate, frankly, can I see how you would be better off!
If you do not have your company declare a dividend then, of course, the company will have to pay Corporation Tax on the full profit, but you won't get hammered personally for higher rates! You can always take a dividend to top up to the level for the higher rate.
Please be so kind as to rate me before you leave the Just Answer site.
Thanks for this. One last question then I promise I'll rate you as excellent - do dividends come off before profit for CT purposes or is CT based on profits before dividends?