The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
There is generally a tax advantage to extracting profits by way of dividends, often once a salary had been taken to utilise the personal allowance, ensure entitlement to certain state benefits and in certain cases to ensure payment of at least the National Minimum Wage, see the Salary v dividend guidance note.
Dividend planning strategies include consideration of cashflow issues, administrative ease as well as tax savings. Clients whose businesses were previously run in unincorporated forms can find it difficult to adhere to remuneration strategies and need to exercise particular care in this area.
A newly incorporated business needs to be aware of the legal requirements for paying dividends, as set out in the Dividends ― payment procedures and practical issues guidance note. Furthermore, it is important to ensure that shareholders are aware of any personal tax liabilities relating to dividends.
One aspect of dividend planning is the effect of dividends being forced up into the higher tax rates. This is one of the reasons why dividend planning should be undertaken only with reliable estimates of other incomes. It is also a reason why dividend planning is sometimes best left until towards the end of the tax year.
The differential between the basic rate and higher rate of income tax on dividends is greater than that for non-savings income and savings. As the top-slice of income, it is also the income that breaches the higher tax rate and additional rate band.
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
‘Bed and breakfasting’ was the pre-1998 practice of selling shares and repurchasing them the following day. This technique can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years using:•a spouse / civil partner•a self-invested pension plan
RDEC ― large company R&D reliefSince 1 April 2016, or from 1 April 2013 by election, large company R&D relief is given through research and development expenditure credits (RDEC), which is a taxable credit payable to the company. As the credit is taxable, it is also sometimes called an above the
When does a trust come to an end?A trust may come to an end because it has run its course and comes to a natural end. If a trust has no assets , it ceases to exist. Alternatively, a trust ends because the trustees or beneficiaries decide to wind it up: the trustees distribute the assets by
On the disposal of the shares in a company, a seller may receive loan stock in the acquiring company as consideration or part consideration for the sale. For tax purposes, loan notes are either qualifying corporate bonds (QCBs) or non-QCBs (NQCBs). The expression ‘corporate bond’ is a general