You have talked about dividends but to get paid a dividend, you also need to own shares, and you haven't mentioned any share ownership.
As Shaun has said, any dividend paid has to to come from profits. The amout you are paid will depend on how many shares you hold, the amount per share the board decides to pay, and how much profit is held back in reserve
Bill
Edit because my stupid PC decided to clitch half way through, and left bits out
-- Edited by Wella on Sunday 3rd of February 2013 05:29:44 PM
I was wondering if you can help me, I am seeking some advice reference having a full time job and being a director of Limited Company.
I have a full time job that pays me £19,760 a year and I have recently been asked if I would like to become a Director in a Limited Company. I am very interested in this opportunity however I am a bit confused about the dividends and pay aspect of being a Director. I would like to work and cover shifts therefore believe that I would be paid whilst being a director, is this possible or am I only entitled to dividends when we choose fit to divide them up of of the company profits? If this is possible how much can I earn in addition to my normal salary and would this after my percentage of dividends?
Dividends are a distribution of profits. No profit, no dividend.
As for the whole concept of being a director and an employee.... Thats sort of a misnomer. A director is an employee so all that you have is two employments where on one of them you are a director.
If you are not yet filling in a self assessment you will need to from now forwards. Contact HMRC to sort that out.
You will have used up your entire personal allowance in the first employment. You could split the allowance between employments by requesting that HMRC split the code but there is no advantage to doing so in this instance.
If you claim any expenses though the business such as mileage allowance you need to ensure strict differentiation between the two employments and personal. A mileage log should be kept of all mileage done as a director with justification for each journey.
One final word about dividends. Do not pay them out as you would salary. That is not strictyly against the law but if HMRC feel that you are paying dividends as salary then they will attempt to tax you on the same basis. A good accountant could argue your case to get that knocked on the head but then you are just converting tax into increased accountants fee's.
Calculate your d0ividends however you see fit but try to pay dividends quarterly, half yearly or annually rather than weekly or monthly.
Note that Salary is an expense of a limited company paid before tax. Dividends are distribution of profits paid after tax.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
