Tax on any kind of income will vary depending on the source and whilst PAYE income tax is fairly straightforward, requiring little or no independent calculations, dividend tax payments are an entirely different matter.
The current set up is that any practice owner/manager of a limited or incorporated business drawing dividends from the company’s profit pot as either their entire salary, or as a share of it, pays tax in the following ways:
However, a blanket £5,000 tax-free dividend allowance will be introduced which will replace the 10% tax credit. Any dividends paid out beyond that first £5,000 will then be taxed for basic rate taxpayers at 7.5%, for higher rate taxpayers at 32.5% and additional-rate taxpayers at 38.1%. Often, these changes will mean that the combination of dividend tax and national insurance contributions paid by practice owners and managers will pay a higher amount of tax on their dividends. For example, for a practice generating £100,000 annual profits and an owner drawing £8,000 as a salary and £73,000 as dividends, the amount of tax and national insurance contributions is going to increase from £28,900 to £32,937.
Financial advice and accountancy services from experts who have been working for the dental sector for many years is exactly what you need to make sure your company profit offers the best return possible, whilst remaining legally compliant.
Contact the friendly team at Lansdell & Rose today, to find out how to maximise the benefits of your hard-earned profit.
Specialist medical and dental accountants Lansdell & Rose have a wealth of knowledge on a range of topics, from pensions to tax and record-keeping, and will help your business to grow. Visit www.lansdellrose.co.uk or call 020 7376 9333.