Dividends & Notional tax credits

[thomski]

If my company makes a profit of £12,000 and I decide to pay the two Directors £1,000 each.

Am I correct is saying that the Directors would each receive a £1,000 Net payment, and that the corporation tax owed would be based on £12,000 and not £10,000 (obviously the £12k - £2k dividend).

Puzzled!

Thanks,


Paul.

[demetris]

Yes, the company would pay corp tax on 12k, because dividends are paid out of post-taxed profits.

But, the directors will not pay any personal income tax on their dividends as long as their total icome fot the tax year doe not reach the higher rate of income tax.

Demetris Savva BA FCCA
http://www.tax-accounting-london.info

[Ian McTernan CTA]

Better to vote a director's bonus to bring the profit below the magical £10K 0% rate of CT.

Would be happy to review the situation for you ona fee paying basis.

Regards.

Ian McTernan CTA
McTernan Associates Ltd
ian@imcternan.com