Dividend tax query

[redheadwitch]

Hoping someone can help who knows how the UK tax system works;

Company director, received small salary from the company, pay NI/PAYE on that income.

Also receive dividends from company, more substantial income. Completes self-assessment tax return each year via accountant to calculate taxes owed on the dividend income.

Question is: Can I claim expenses from the dividend income. Since WFH, personal expenses have risen drastically, as Im sure is the case for many people. So, could I claim for things such as mileage log for use of personal car to commute to work, attend meetings etc. Cost of telephone for making calls from home, stationery such as printer paper etc.

Larger IT purchases etc tend to go through the company but I was wondering whether I can claim some things as expenses through personal tax return, based on only dividend income?

Not sure if everything has to go through the company and dividends cannot be subject to expense claims.

No

if you receive dividends then you are running a limited company. You can't combine your personal income (dividends) with the limited company expenses.

You can pay expenses to any employee (ie you if you are also PAYE) before you pay corporation tax and before any dividends are paid.

So Company income £50,000. You pay yourself a salary of £12,500 (enough to pay NI but not tax) . You then pay other expenses related to doing the job, mileage (@45P a mile for the 1st 10,000), paper, printing, office costs etc). Cost of accountant, running pay roll
Lets say they total £15,000

So income £50,000
Costs £27,500

profit= £22,500 on which you would then pay corporation tax @19% so £4275

That would leave £18, 225 that could be a dividend. How that is spilt depends on how many shareholders and how many shares there are

The first £3000 is tax free and then you pay a graduated tax on the rest. If you have not used up your personal tax limit that kicks in as well.

Do you have an accountant?

The expenses for my company deduct before tax are:
Indemnity insurance, quickbooks , accountant fees, mobile phone, I used to have dedicated broadband but no longer, printing, paper, books, stationery, travel costs- mileage, trains , planes, hotel costs. Capital items such as laptops and printers etc etc My salary and my administrator. Ni and pension.

I also have VAT due to turnover.

These are all deducted before I calculate profit and so pay corporation tax. Your profit from which you can make dividends is what is left after all costs and tax has been paid

You need a better accountant. Have they not questioned why you dont have costs?

Thanks all. My post's a bit ambiguous, I apologise. We do of course have costs for the company; lots of accounts payable and receivable. And we pay corporation tax based on that each year.

My question was specifically related to the personal taxes that company directors pay in relation to their dividends income. I wasn't sure if we could claim expenses on those, for their personal day to day expenses.

It sounds like we should be tracking those costs and putting them through the company, thus lessening corporation tax. Am I picking that up correctly? But their personal taxes i.e. what's due on their dividends is pretty fixed and not open to any way of lessening what's due there?

They are either business expenses (which go through the company as explained) or personal expenses for which there is no tax relief available.

@redheadwitch

Thanks all. My post's a bit ambiguous, I apologise. We do of course have costs for the company; lots of accounts payable and receivable. And we pay corporation tax based on that each year.

My question was specifically related to the personal taxes that company directors pay in relation to their dividends income. I wasn't sure if we could claim expenses on those, for their personal day to day expenses.

It sounds like we should be tracking those costs and putting them through the company, thus lessening corporation tax. Am I picking that up correctly? But their personal taxes i.e. what's due on their dividends is pretty fixed and not open to any way of lessening what's due there?

Yes, you have to claim all expenses that you incur in running the business as a director or through doing you role as an employee from the business. This is done before you calculate any profit and pay any tax.

You could possibly claim back mileage for previous years etc. You could certainly put through past expenses- there may be time limits. Ask your accountant.

You can also give up to £50 tax free as an employee gift- not cash limited at £300 a year for directors/family members through the trivial benefits allowance
www.gov.uk/expenses-and-benefits-trivial-benefits

It sounds like you are trying to bring down your dividend income so that you have got less of it falling into a higher rate tax threshold?

Are you making use of your pension contribution allowances?