View more on these topics

The dividend of the affair

Company&#39s position

Pre-tax profit £10,000

Corporation tax @ 19 per cent £1,900

Net to distribute £8,100 (1)

(1) Because the dividend is not deductible, the corporate tax liability for the company remains at 19 per cent, that is, £1,900, so £8,100 is available for distribution.

Shareholder&#39s position

Shareholder receives £8,100

Grossed up by 10 per cent £900

Taxable £9,000 (1)

Less tax @ 32.5 per cent £2,925 (2)

Less tax credit £900

Net to pay £2,025 (3)

Net dividend £6,075 (4)

Effective rate of tax 39.25 per cent

(1) The dividend is £8,100 grossed up by 10 per cent tax credit to £9,000.

(2) The tax rate payable on the gross dividend by a higher-rate taxpayer is 32.5 per cent.

(3) Tax of £900 is already deemed to have been paid via the tax credit and so the balance liability is £2,025.

(4) The director is left with a net dividend of £6,075. The dividend has therefore suffered an effective rate of tax of 39.25 per cent.

Recommended

Net dividend

Last week, I started to look at the seasonal subject of how best to extract funds from a private company with minimum payment to the authorities. I have already looked at the criteria and formalities for payment, including the payment of interim dividends. This week, I would like to look at the more well-known financial […]

The Miles file

After three gruelling years in the equity market, investors do have something to celebrate in 2004. As I write in the final week of December, the FTSE 100 index is on course to finish the year in positive territory.The last time that savers enjoyed any gains from the London stockmarket was in 1999. In fact, […]

Scottish Life offers pension platform access for SMEs

Scottish Life is offering an employee benefits&#39 platform which allows smaller companies access to online pension valuation traditionally available only to blue-chip company schemes.The platform will mean staff of SMEs using the system will be able to log on to their own account to track their occupational pension pot and other employee benefits.The new offering, […]

A simple start, absolutely

By the end of January, the main pension industry bodies will have a gentlemen&#39s agreement with the Treasury that pension simplification will go ahead – with a lifetime fund limit of £1.4m – so they can get on with preparing for A-Day in 2005, leaving the National Audit Office to go through the motions on […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com