Calculating amount available to extract as a dividend

[Pumpkin House]

I am about to start trading through my Ltd Co.
Assuming I wish to pay myself a low salary and extract ALL available profits as a dividend, I am aware that corporation tax is calculated after salary deductions. I also know that I need to calculate what the corporation tax will be and reserve that aside before calculating what amount is left for distribution as dividends.

However, as I anticipate taxable company profit to be within the small companies category, will I ALSO need to calculate the additional cost of the "19% top up levy ". This doesn't add up to me, as it will then be impossible to extract every single penny out of the company.

Also do I need to calculate Class 1 secondary NI contributions (12.8%) as well to ensure that amount is available for payment before working out what is left for dividend payments. I read somewhere that they are tax deductible (as well as salaries) too?

Thanks!

[deanshepherd]

With regard to calculating the corporation tax due, only dividends paid during the financial period are used in the NCD calculation. You can extract the available profit as an interim dividend in the current financial period without impacting your figures.

Class 1 secondary NIC should already have been calculated if you were operating a payroll and indeed already paid.

I would advise you to seek professional advice in completing your coporate tax return and end of year payroll forms.

Dean Shepherd
dean@mmi-online.co.uk
www.mmi-online.co.uk

[Lambs]

Try:

Maximum Distributable (In-Year) Dividends = Profits (CT) x (1-Average Rate) / (1.19 - Average Rate)

Average Rate = the average rate which would have applied, before having to tinker with NCDs.

Try it; any problems just post to here: I should pick it up.

Regards,

Lambs