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How are dividends treated?

asked by Tony Brookes posted 2 Years ago at 20:16
I have a small Limited company which I'm a director of drawing a payroll salary of £24,000. The company year end is April 2011 and during the year I took a small dividend of £4000. Do I report this on self-assessment returns, or is this part of my earned income which has tax deductions made off payroll less employers NI or something else?

1-2 of 2 Answers
Woods Squared Limited answered 2 Years ago at 15:35
Afternoon Tony

The additional dividend is reported on your Tax Return and doesn't need to be included within your payroll.

On a related note based on your post you could be paying more tax than you need to - contact me for more details but based on your query above you could save approxe £3,500 per year

Regards

Alan
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Andrew Diver answered 2 Years ago at 15:48
This figure £4,000 goes on box 3 on page 3 of your tax return.

The dividend will be including a notional 10% tax credit. And as long as your income remains below £42,475 you won't pay any further tax on the dividend.

If you did take more in dividend and less in salary this would save you in National insurance contributions as well as the company.
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