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Where Taxpayers and Advisers Meet

Tax on Dividend from Ltd Company

Chodu666
Posts:3
Joined:Thu Nov 01, 2018 7:19 pm
Tax on Dividend from Ltd Company

Postby Chodu666 » Thu Nov 01, 2018 7:39 pm

Hi all,

I hope I've posted in the right subforum.

I'm a director of a ltd company. I am paid via PAYE and then will take profit as available, normally via dividend.

I'm starting to think about my pension and have one question.

I believe if I take profit as a dividend I will pay tax on my self assessment.

I believe if i take the profit as a pension contribution, no tax is payable but I'll get tax relief on my self assessment as a higher rate tax bracket.

My question is what happens if I take a dividend but then decide to put it all into pension ? Do I still need to declare the dividend as a dividend on my tax return (and pay tax on the dividend)? Or just declare it as a pension contribution (so not have to pay tax but get tax relief)?

I assume it'll be the former but hope it's the latter!

I hope that makes sense!?

Any help appreciated.

Thanks

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Tax on Dividend from Ltd Company

Postby Lambs » Fri Nov 02, 2018 12:19 pm

C,

Not qualified to give financial advice but I think it may be easier for your company to make an employer contribution directly to your fund? It would not be taxable income to you, and the company would ordinarily rank for tax relief so it seems at first blush to be more efficient than div-out?

With regards,

Lambs

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: Tax on Dividend from Ltd Company

Postby AdamS93 » Fri Nov 02, 2018 7:09 pm

You need professional advice. Some of the things you have said indicate you do not understand how the tax relief around pension contributions work.

You company can set up an employer pension fund (your current pension provider may allow your employer to contribute to your fund but you will need to tell them that they are employer contributions).

If you do make employer contributions, your company will get corporation tax relief as the pension contribution will be like any other expense - no additional tax relief is given.

If you make personal contributions, you only get tax relief on contributions up to your net relevant earnings. Your net relevant earnings being your salary NOT dividends. Therefore, if you pay a low salary say £8,000, the most you can contribute to a personal pension scheme is £6,400 per year (net contributions).

If your company makes pensions contributions and they are made as personal pension contributions, this amount will either be treated as dividends or salary for yourself (or a loan from the company) but certainly not a company expense...

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Tax on Dividend from Ltd Company

Postby Lambs » Fri Nov 02, 2018 7:18 pm

A, not sure I follow your last para. If his company makes a pension contribution it will be an employer contribution. Subject to the rules for Annual Allowance and deductibility that have applied since A-Day. If his employer puts the funds at HIS or HER disposal first, then we are back to the situation he originally set out, which I suspect will be less efficient. I would, however, endorse the recommendation that he speak to a qualified professional because there does appear to be a lack of appreciation of all the options available to him.

With apologies for speaking of the OP as if he were not there.

Regards all

Lambs

Chodu666
Posts:3
Joined:Thu Nov 01, 2018 7:19 pm

Re: Tax on Dividend from Ltd Company

Postby Chodu666 » Sat Nov 03, 2018 11:13 am

Thank you all for your replies.

What's the best place to look for professional advice?

I've seen theres a site called unbiased.co.uk....any other suggestions?

Should I be looking for a financial advisor/accountant or both?

Kind regards

C

Chodu666
Posts:3
Joined:Thu Nov 01, 2018 7:19 pm

Re: Tax on Dividend from Ltd Company

Postby Chodu666 » Tue Apr 09, 2019 10:41 am

Deleted


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