Do I have to pay a capital gains tax twice on my profits if I pay a dividend to myself?
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nickyp456
1 year ago
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
you have confused matters a little.
you will have paid corporation tax in advance of paying/declaring a dividend.
this will satisfy your personal income tax liability up to the basic rate of tax but if your total income for the year falls into the higher or additional rate of tax then you will pay the additional amount of tax due to take your tax burden to 32.5% or 42.5% respectively.
there is no CGT to pay as CGT is levied when you dispose of an asset for profit and you have created more profit than your annual allowance which is £10100 this year.
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you will have paid corporation tax in advance of paying/declaring a dividend.
this will satisfy your personal income tax liability up to the basic rate of tax but if your total income for the year falls into the higher or additional rate of tax then you will pay the additional amount of tax due to take your tax burden to 32.5% or 42.5% respectively.
there is no CGT to pay as CGT is levied when you dispose of an asset for profit and you have created more profit than your annual allowance which is £10100 this year.
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Dividends are taxed as 'income' in your hands and if you are a non-taxpayer or basic rate taxpayer there will be no further tax to pay. They are paid from the company's profits, which are subject to corporation tax, so there is no question here of a double tax charge.
Of course, instead (or as well as) receiving dividends, your company can make pension contributions for you. This is pretty tax efficient because the contributions enter your pension pot without being subject to either tax or national insurance deductions, and the company can offset the full contribution against profits, hence reducing any corporation tax liability.
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Of course, instead (or as well as) receiving dividends, your company can make pension contributions for you. This is pretty tax efficient because the contributions enter your pension pot without being subject to either tax or national insurance deductions, and the company can offset the full contribution against profits, hence reducing any corporation tax liability.
Expert Financial Adviser Answer
Paul Ross DipPFS CII(MP&ER)
answered 1 year ago
Dividends are extraction on company profits after tax and therefore have already been subject to corporation tax. Dividends therefore come with a non-repayable 10% tax credit. To the extent that a dividends falls into you higher rate of income tax it will be subject to tax at 32.5%. Dividends are a form of investment income and not liable to national insurance.
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