Biggins

My accountant is off doing on-site audits this week so thought i'd toss this one to the SN financial gurus.

Although my Company will make a small loss this year (end 31/03/04), in light of the changes in tax laws coming into force in April, I wish to pay myself a dividend from reserved profit. We have a large amount reserved on our P&L account from previous years and of this I wish to take £15k as dividend. I have already taken £25,700 as salary this year and paid standard rate PAYE & NI.

How does one go about taking the dividend payment? What tax applies? Exactly how will it change for 2004/2005?

Also, there is another share holder (15%) who is a family member. This person was made shareholder in order to profit from any sale of the business, if it every occurs, and plays no part in the day to day. She is not expecting any payment, dividend or otherwise. Does she have do officially decline from receiving a dividend if I am taking one??

Thanks for any help. Obviously I will be checking with my accountant before proceeding but wanted to get the general gist of things.

ProperCharlie

Basically, to pay yourself a dividend you need to agree the level of dividend per share to be paid. if the other shareholder is prepared to waive their share, then that needs to be minuted. you then write yourself a cheque for your dividend. for tax purposes, the part that falls below the higher rate of income tax (once you have considered all the salary that you have been paid that year) does not attract any further tax. the part that is above the lower rate threshold will end up costing your roughly 25% of that amount in income tax. if you want to work it out exactly, you have to gross up the dividend (the amount you receive is 90% of the amount that will be considered for tax purposes) then give yourself a tax credit of 10% of the gross amount, then add the gross amount to all other payments that you have received that year, then take off your tax allowances and all the tax you have already paid, then apply the normal rates of income tax to the balance. not necessarily in that order. or something like that in any case.