Personal Tax Archives - Page 2 of 2

Payroll & PAYE, Personal Tax, Tax Issues

Payroll and PAYE – A Complete Guide For First Time Employers

George / 30/08/2021

Payroll could be complicated for numerous foreign managers and companies that need to perform business transactions within the UK. So, in case you’ve got come to the point of setting up a payroll system and the thought of running PAYE fills you with fear, or you feel that you don’t know enough to make things right, then no need to worry as this straightforward blog will help you understand things better! This blog is based on the following essential steps to get the payroll done effectively. Enrol as an employer with HM Revenue & Customs Get yourself registered for PAYE Collect Workers details Utilise payroll software So let’s explore the details 1. Enrol as a Business Owner with HMRC First of all, make sure that whether you wish to enrol as a business owner. Ordinarily, you’ll have to do so if you are going to recruit your first employee or utilise subcontractors for development work. Moreover, you’ll have to be enlisted as a business owner if you’ve set up a local company and planned to pay yourself income as a director. Use this form to enrol as a proprietor. After becoming a business owner for the first time, you need to understand your legal obligations towards your employees. As a business owner, the charge and work obligations you have for your staff will depend on the contract you provide them and their employment status. HM Revenue & Customs have delivered a checklist for first-time business owners, which we suggest you read. Are you looking for a professional to help you with employment contracts or understand your responsibilities as a business owner? Then at CruseBurke, we have a team of skilled accountants that provides solutions to all your business problems! 2. Get yourself Registered with PAYE After registering and receiving your confirmation letter as a business owner by HMRC, you have to register online to pay taxes and NICs. This concept is termed PAYE. 3. Collect Workers details Make sure you collect all the necessary details from your new workers. You’ll require: Full name, DOB Start date National insurance number Home address Affirmation of whether they have other employments or a Student loan HMRC have made the data collection process simple as you’ll ask your new worker to fill within the online HMRC starter form. Before giving you all the required information, the newly hired employee will completes the starter form online, prints it out and sign it. 4. Utilise payroll Software The whole process will be automated with the help of a cloud-based payroll software. It will reduce your essential time and stress by taking care of tax calculations, NICs, your business stipend (if you’re entitled to one) and by producing payroll slips for workers. In addition, it will automatically generate your Real Time Information (RTI) reports submitting it to HM Revenue & Customs and reduces your burden by producing payslips for workers. Final Thoughts Famous software like QuickBooks, Sage and Zero provides you with packages that include payroll system with support. If you utilise one of these accounting software, it’ll make the payroll process easier for you. Tackling payroll by yourself is still daunting. Our payroll team can help you out with this. We are a team of professionals who offer training and support to help you get your payroll system up and running. So reach us now to save your time and grow your business like never before! Disclaimer: The content in this article is general in nature.

Personal Tax, Tax Issues, VAT

Is Client Entertainment Tax Deductible?

George / 24/08/2021

One of the most important marketing tactics that many businesses use is business entertainment, especially for retaining new clients and customers. Spending cost on business entertainment matters a lot when you want to build a network and attract new clients. So, if you’ve decided to allocate a marketing budget for entertaining clients and customers, you may think that whether the client entertainment is tax-deductible or not. Read on to find out the answer! Getting professional advice from a VAT accountant is preferable to reclaim VAT and to be saved from hefty tax implications that can wipe out your profit. So get in touch with our experts to be on the safe side! What is Entertainment as per HMRC? Entertainment is anything done for hospitality. Here is a list of common examples of entertainment: Offering food and drink Providing accommodation Provision of concert tickets and theatre Entry to sports events and clubs Use of capital assets for entertainment purposes Is Client Entertainment Tax Deductible? The simple answer to this question is ‘no’. As you can normally recover input tax, you paid on goods or services exclusively for business purposes. Generally, the cost incurred on entertainment for clients or customers is not considered business entertainment. For this reason, it is not tax-deductible and VAT cannot be recovered from it. However, still, there are few instances where a person can reclaim VAT, but the rules are complex and troublesome. For instance, if there is an entertainment party where you have invited your staff or employees, input tax on the cost spent on employees can be reclaimed. But still, reclaiming VAT on it is not that simple. If the employees acted as the host at the party, then the cost incurred on employees cannot be reclaimed. Say Bye to your financial worries with CruseBurke! Contact today! Is Client Entertainment an Allowable Deduction for Corporation Tax? According to HMRC, client entertainment is not an allowable deduction for corporation tax purposes. Hence, you need to pay for the cost of entertainment like the cost spent on a dinner for a client from the bank account of the business. In this stance, you need to bear in mind that the expenses that incur from your company need to be a genuine business cost and they must not be extra or excessive. Now, you might be wondering whether is it worth spending on client entertainment. It’s up to you and may vary based on your business’s nature and the clients you want to build up. Although the entertainment cost of the business is not favourable when it comes to taxes and VAT, however, you can establish good relations with your business associates and win new contracts for your business. Therefore, we can conclude that the initial investment needed to win projects is worth your time and money. Entertaining Overseas Clients/Customers You can reclaim the VAT incurred on the entertainment cost of the overseas customers/clients carried out at a reasonable scale, which is done only for business purposes. As per HMRC, an overseas customer is someone who’s not an ordinary resident of the UK or performing its business activities in the UK ( including the Isle of Man). However, there’d be an output tax if there’s a personal benefit to the overseas customer by the entertainment. In this way, it will cancel out any recoverable input tax. In most cases, the private or personal benefit is linked with business entertainment. But if the expenses are strictly for business purposes, the private benefit can be ignored. Need Help…! Knowing whether the client entertainment is tax-deductible can be complicated as there are many factors involved. However, as a general rule of law, it is not tax-deductible as it is not wholly and exclusively done for business purposes. On the other hand, you can reclaim VAT on the expenses incurred on the entertainment cost of employees or overseas customers, provided they’re only for business purposes. For detailed information about business entertainment, you can visit the HMRC website. Whether you’re a startup or an established business, CruseBurke is here to grow your business beyond numbers. So, contact our qualified accountants to sort out your issues! Get an instant quote right away! Disclaimer: This blog post provides general information on the above topic.

Personal Tax, Tax Issues, VAT

How Long Does a Tax Investigation Take? Everything you Need to Know!

George / 20/08/2021

HMRC tax investigation can be a dreadful prospect, especially for the one who has never been through this phase. In the worst-case scenarios, the investigation can take longer duration than normal and its consequences can be stressful. But fortunately, it is rare. The fear of HMRC investigation is natural and understandable. However, this process shouldn’t be that onerous if you’re efficiently handling your accounts. So in today’s blog, we’ll have a look at what is a tax investigation? What are the reasons for tax investigation? What’s its procedure and how long does a tax investigation take? Let’s start! It is advisable to get the help of a tax expert to avoid a Tax Investigation. Get in touch with us now! What is a Tax Investigation? HMRC performs a tax investigation to inspect the business’s finances to ensure that it is paying its due taxes, both current and of the past. You’re legally required to cooperate with the HMRC tax investigation team and it doesn’t imply that you have made something wrong. If you’re handling your finances with proper care and you’re having a qualified accountant, a tax investigation will not be that daunting and time-consuming. Reasons for a Tax Investigation HMRC may investigate the finances of your business for a number of reasons. Taxes can be complex and there are chances of mistakes. But you don’t need to worry if you have made an honest mistake. Here are a few of the common reasons that cause a tax investigation: Your business seems a high risk for HMRC There’re omission, mistake or unusual activity in your accounts There are noticeable inconsistencies between your tax returns like there is a large fall in income Your business is frequently filing tax returns late Your business is the target area of HMRC HMRC is suspecting your business You are having an offshore bank account Your costs are above the industry norms You’re getting income from property HMRC gets a tip-off What are the Taxes that HMRC Investigates? Many people believe that a tax investigation is just about investigating the income tax. But it’s not true. Typically, these are the taxes HMRC can investigate: VAT Capital Gains Tax Corporation Tax Construction Industry Scheme (CIS) Climate change levy Insurance premium tax Landfill tax Insurance premium tax IR35 On the lookout for Tax expert? Reach out to us today for affordable accounting services in Croydon! We provide a wide range of accounting and taxation services to small and medium-sized businesses across the UK! Procedure of a Tax Investigation So, how you’d be aware of a possible tax investigation? Before an investigation, you’ll get a notification from HMRC about the investigation and it may ask you to provide basic information as evidence to support your stance. The data they may ask will depend on the type of investigation they’re performing. You need to provide all the documents to HMRC on time, within 30 to 35 days. Failing to provide the records and data can lead to hefty penalties. The investigation can uncover all the claims and errors. Afterwards, you’ll receive a letter about the outcome of the tax investigation and the due amount you owe to HMRC. The results may not be correct always. So it’s better to consult a tax accountant before accepting the results. How Long Does a Tax Investigation Take? There is not a standard period for a tax investigation by HMRC. The duration of a tax investigation will depend on the investigation level and the paperwork required. This process can take few months, but sometimes it can extend to more than a year or even longer (for complex business structures). In addition, an investigation can be delayed by HMRC to get more information. It is not possible to predict the time limit of an investigation, but you can minimise its length. Cooperating with HMRC and providing the documents on time can speed up the investigation process. This process can take a long time if HMRC finds something new or hidden. HMRC might ask you to provide 20 years of records in case of underpayment of taxes. Usually, an Aspect investigation (where a single aspect of a return is inspected) takes up to 3 to 6 months. On the other hand, a Full Enquiry investigation can stretch to a year and more if the case is complex. And the more time it takes, the more costly it becomes. Quick Sum Up After discussing how long does a tax investigation take, you might be wondering how to avoid a tax investigation or make it less severe. In this instance, you need to maintain and keep all the records in order from the start of your business till now. The more tax records you have, the better. Bear in mind that if you receive a notice for a tax investigation by HMRC, the tidy and up-to-date financial records will help you to avoid problems during the process. Moreover, it will speed up the process of a tax investigation. A tax specialist can assist you better with what to do when you face a tax investigation. CruseBurke offers professional services to avoid or minimise the consequences of a tax investigation. Our accountants and tax experts will resolve any problem in your accounts before they turn into big issues that can lead to a Tax Investigation. Have a query? Contact us today, we’d love to help out! Disclaimer: This blog provides general information on the above topic.

Personal Tax, Tax Issues, VAT

Who Needs to Complete a Self Assessment Tax Return?

George / 13/08/2021

Find out what self-assessment is, who needs to complete a self-assessment tax return, when to submit one and what penalties you need to pay for late payments. Let’s delve into the details. There are over 12.1 million people in the UK who need to fill out and submit a self-assessment tax return to HMRC. The deadline to submit a self-assessment tax return online and pay the previous tax bill is 31st January. For the paper tax return, it is 31st October 2025. If you want to register for self-assessment as a self-employed/sole trader, not self-employed and a partner or partnership, you can register on 5 October 2025. A large number of our clients face problems while registering for self-assessment. Therefore, to make things easy, CruseBurke is offering self-assessment registration services for you to avoid stress and fuss. So what are waiting for click here to register today! What is Self Assessment Tax Return? Self-assessment is a system employed by HMRC to work out the tax on your income. Generally, the tax is deducted from your wages, pensions, and savings via PAYE (Pay As You Earn). But if you or your business is getting any income from another source, you need to report it to HMRC by sending a self-assessment tax return. Who Needs to Complete a Self-Assessment Tax Return? You need to complete a self-assessment tax return to HMRC annually to pay income tax and National Insurance (NI) against your earnings/profit. The tax return needs to be submitted if you: are a limited company director or a business partner are an employee/pensioner with annual earnings of £100,000 or more want to claim tax relief on pension contributions (higher or additional rate taxpayer) have earned £10,000 or over from investment income or savings interest need to pay capital gains tax from selling assets at a profit want to claim child benefit, if your income or the income of your partner is above £50,000 are the trustee of a registered pension scheme or of someone who has died If you receive a P800 notice from HMRC showing you underpaid tax, and you’re not repaying it through PAYE, you may need to file a tax return. are a Lloyd’s underwriter are a religious minister Remember that sometimes you need to pay taxes and NI via PAYE and need to complete your self-assessment. For instance, if you receive an investment income and operate a part-time business along with your employment. Furthermore, limited companies need to file their company’s tax return along with the tax return on personal income. CruseBurke offers financial and tax consultant services for contractors, self-employed individuals, and limited companies to stay on top of their finances. Work with our tax consultants today to address your tax returns! Contact now! When will HMRC Send you a Tax Return? Usually, HMRC will send a return to you if: you have earned income without paying tax on it (like income from investment, land, property or overseas) you’re a pensioner getting old age relief, though you need to send a short return with fewer details your capital gains have exceeded the annual exempt amount (£3,000) you were required to fill in a tax return last year Bear in mind that if you’re already aware of the tax you need to pay, you shouldn’t wait for HMRC to contact you. As it is your responsibility to declare your taxable income. After receiving a tax return from HMRC, you are legally bound to complete and submit it via post or online. On missing the deadline, you need to pay penalties and may also pay interest on the surcharges on any tax you that you need to pay. The deadline for sending tax returns via post is 31st October and online submission is 31st January. Penalties for Late Payments You need to prepare your tax returns before the deadline to avoid errors in the hassle of sending the returns late. You’d be liable to pay interest on unpaid tax and penalties. The standard penalties for sending tax returns late are as follows: Quick Sum Up Hopefully, now you know what is a self-assessment tax return, when to pay it to them, who needs to complete a self-assessment tax return, and the penalties for filing it late. Moreover, if your circumstances change like you receive new income from investments or shares, you need to inform HMRC about the changes. As it will affect your tax return. If you want to avoid paying hefty penalties, feel free to contact our certified accountants for accuracy and efficacy during the process of sending self-assessment tax returns! Disclaimer: This blog is written for general information on the self-assessment tax return.

Personal Tax, Tax Saving Tips

How Much Can You Earn Before Paying Tax?

George / 07/04/2021

You are liable to pay income tax when your gross income reaches a certain threshold. But, a personal allowance might save you from income tax to some extent. Moreover, you need to know about the latest changes in income tax rates and thresholds of income, after the start of the new tax year (6th April 2021). In this blog, we’ll also discuss them all and you’ll get to know how much can you earn before paying tax. Meanwhile. if you are looking for someone to reduce your income tax liability using legal practices, no one can do it except our accountants! Personal Allowance: The personal allowance is an amount from your earning that is given to you tax-free by the government. This allowance may change from year to year. Currently, the personal allowance is £12,570 for the tax year starting from April 6 2021 to April 5, 2022. This allowance may differ if you’re availing other allowances or earning a lot of money. If you are earning below £12,570, you are free from the income tax. The marriage allowance lets a spouse transfer the unused allowance to his/her partner. Those people who are suffering from a sight issue can avail Blind person’s allowance. Need more details on personal allowances during Covid crises, reach out to us! Current Income Tax Rates: The threshold of different category taxpayers has increased recently after 6 April 2021. The basic rate taxpayer will be going to pay 20% of their income tax from earnings above £12,571 up to £50,270. Along with that, the threshold for high rate taxpayers earning income from £50,271 up to £150,000, they pay 40% of the income tax. Additional rate taxpayers have to pay 45% of income tax on income above £150,000. You pay income tax at the end of the tax year through PAYE (Pay As You Earn) or Self-assessment tax returns. To find out the answer to how much can you earn before paying tax, you need to look at your income tax category. You can add the income tax, you have paid to HMRC, with your net income to find out your gross income (income without excluding taxes). Key Takeaway: Chancellor Rishi Sunak has announced that the income tax threshold of the current year will remain the same till 2026. How to Check Tax-free Personal Allowance? You can find out your tax-free personal allowance through your tax code that is generally mentioned on your payslip. If you have found letter L on your payslip, it means you are aviling the tax-free personal allowance. Instead of it, if you found letter M on your payslip, it implies that you have transferred your personal allowance to your spouse using a marriage allowance. While letter N indicates the opposite that you have received your spouse’s personal allowance. Quick Sum Up: After knowing how much can you earn before paying tax, you can also avail an income tax relief to pay less amount of income tax (conditions applied). However, you are liable to pay income tax earned through dividends, interest, state benefits, salary, etc if your total income from various sources exceeds the personal allowance threshold. Worried about the high-income tax rates, contact our accountants for help! Disclaimer: The blog is written for informational purposes only. For support contact our accountants.

Personal Tax, Tax Issues, Tax Saving Tips

Constant Vigilance Spotting and Reporting Tax Return Scams

George / 04/02/2021

The National Fraud Intelligence Bureau reported that coronavirus-related scams skyrocketed 400% in the first month of lockdown in the UK in March 2020. Over 100 cases were recorded, with losses totalling £970,000. The scams continued over the course of the year. At the beginning of 2021, fraudsters are now targeting citizens who are filing personal taxes. HM Revenue and Customs (HMRC) reported copycat HMRC websites, phishing scams, and fake text messages sent to trick people into disclosing account information and personal details. In this article, we will cover the methods of tax return scams, how tax return scams work, how to spot it and what to do if you have been scammed. How Tax Return Scams Work Tax return scams usually start in the same way. A fraudster will communicate with you over landline, text message, or email, claiming to be from the HMRC. They will say that you can claim financial help or that you’re due a tax refund. Sophisticated fraudsters even reference your Government Gateway Account and create email graphics that look official. You will then be led to a portal that requires you to enter all your details, bank account information, and other data, including your Unique Taxpayer Reference Number (UTR). If successful, the fraudsters will be able to claim your refund or even get into your bank account. Fraudsters are leveraging technology in increasingly creative ways, so you need to be vigilant whenever you receive text messages or emails from seemingly official channels. It’s best to keep from clicking any of them, even if they’re simple promo texts from your favourite retail store! Simply accessing a suspicious link may make your phone or computer vulnerable to malware or viruses. How to Spot a Tax Return Scam For tax return scams, in particular, spotting them is simple: HMRC does not contact customers through email or text. It always sends all tax return communications via post. If you are employed and don’t usually fill in your tax return, any HMRC communication is a scam. If you do fill in a Self Assessment Tax Return form or VAT returns, HMRC will communicate with you via email. It’s important to always check that the email is sent from an email address ending in hmrc.gov.uk. HMRC will never ask for your bank account information, passwords, or PINs. It’s best never to enter any of this information in an online form that’s in any way suspicious. If in doubt, you can get in touch with HMRC to check if the communication is genuine. You can forward suspicious emails to [email protected] and texts to 60599. What to Do If You’ve Been Scammed If you think you’ve been the victim of a scam, check your bank accounts immediately and see if you’ve lost any money. Contact your bank and ask for advice on how to protect your accounts. You may have to change your passwords, create a new account, or cancel your card. Check your accounts with HMRC as well, and let them talk you through how you can retrieve lost money. Conclusion Fraudsters continuously come up with new and creative ways to scam people into giving away personal information. It’s more important than ever to be vigilant and to protect yourself from these attempts. Double-check email addresses and website URLs before clicking links and entering any personal details. HMRC sends all tax refund communication via post, so report any suspicious texts or emails to their official channels. Are you looking for affordable accounting services in Croydon to help you with your tax filing and avoid tax return scams? CruseBurke provides affordable accounting and taxation services to individuals and small businesses. We have over 100 years of combined experience in providing a broad range of services, such as self-assessment tax returns, corporate tax, auditing, and more. Contact us today!

Personal Tax, Tax Issues

HMRC Tax Inspections: What to Expect and How to Prepare?

George / 22/12/2020

HMRC conducts random compliance checks against businesses and individuals. They usually smell irregularities through suspicious activities and tax inspections to find any substance. This is a routine process to encourage businesses and other taxpayers to follow the laws and regulations. If you ever notice that you are under the tax investigation of HMRC, don’t think of it as an end process for your business. They don’t want to shut your company. Their end goal is to recover whatever dues owed to them. The more you facilitate this procedure the more things get easy for you. Here are some of the tips on how to go through this phase: Don’t panic First thing’s first, don’t get edgy. You can not swing the tide your way by just simply panicking. The best way to weather the process is by cooperating and staying calm. If things go beyond your grip, seek professional help who can provide you with technical advice. Negotiate a Time to Pay Agreement Sometimes HMRC negotiates to reach an agreement. They consider the time to pay agreements as well. Time to pay clearly outlined plans for the debt repayments. Willingness to pay back to the HMRC will go on to represent a gesture of good faith that certainly helps with the cause. Adopt complete honesty If you lie at any stage of the tax inspections, it will permanently dent your reputation. You will be designated as a non-cooperating individual. Forging documents, falsifying evidence or concealing information from HMRC will make things worse. HMRC uses a state-of-the-art software ‘connect’ that feeds on data and information to sniff their targets. If you adopt a complete honest policy with HMRC, you can expect to survive the investigation. Respect HMRC timeframes During HMRC tax inspections, you may come across any communication by the HMRC that usually comes with a Compliance Check letter. The letter will want you to contact them by the given time scale. The time scale may be intended to spur you into action. But you have to respect the given timeframe. Sitting quite will prompt their measures. Disclaimer: The information about the tax inspections burden provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

Accountants, Personal Tax, Tax Issues

Why Outsourced Accountants are the Solution to Conquering Tax Returns

George / 01/04/2020

Regardless of whether you enjoy organizing your finances or wish income statements could disappear altogether, there’s no denying that tax returns are a vital part of your business’s financial feasibility and success. They may be regarded as the dread of most British business owners, but tax returns have proven themselves to be one of the most integral parts of doing business, especially as the HMRC’s own standards grow stricter by the day. While a business’s tax returns are a vital component of its long-term profitability, the simple truth is that they’re complicated, time-consuming, and difficult to understand if you aren’t a financial professional. Fortunately, taking on your business’s own tax returns in the most accurate, efficient, and timely manner possible doesn’t have to entail sacrificing crucial opportunities to improve your business. In fact, outsourcing the services of an accountant will get the job done! To better understand exactly why an outsourced accountant is a solution that your business needs in order to succeed while staying productive amidst organized chaos, let’s look at everything you need to know about them. Efficiency and Effectiveness at their Finest As your business continues to rake in more success, generate more profit, and welcome more customers, your workload is set to proportionally increase as well. When not approached properly, the greater level of success that your business is experiencing may not be as sustainable as you’d hope if you don’t have the necessary skill or manpower to whip everything into order. By letting an outsourced accountant step in, however, you can hand off most of the challenging numerical tasks over to an experienced professional who can get them done more efficiently and accurately. Tax returns, in particular, are an outsourced accountant’s expertise that can be used to your business’s advantage in spite of growing complications with the filing process as your business scales and grows at record rates. Instead of having to burden yourself with the process of filing your tax returns without the essential skills or knowledge, outsourced accountants can help you avoid even the tiniest of errors at all costs. The Significant Payoff of Outsourcing an Accountant Aside from the great deal of efficiency and effectiveness that they provide, another significant selling point of outsourced accountants—such as the professionals at Cruse Burke accountants In Croydon—is that they make for a great investment. Thanks to the fact that most outsourced accountants are highly skilled and have years of experience from working with a wide range of businesses, they can help turn the tides on your tax returns and tweak them to your advantage. From handling your tax returns and filings to spotting other lucrative opportunities and problem points in your business, an outsourced accountant can easily contribute to a greater ROI for your business in the long run. “Okay, outsourcing the services of an outsourced accountant sounds great— but how much does it cost?” Depending on the overall size of your business, the number of transactions it goes through in a certain amount of time, and the complexity of its operations, the costs of outsourcing an accountant for your tax returns can vary. Fortunately, getting a quote for your own business’s needs with affordable Accountants In Croydon by filling out this form is both free and easy— so feel free to fill it out and give us a call today!

Personal Tax, Tax Issues, Tax Saving Tips

Timing Dividends Right Could Help Save Tax

George / 12/08/2019

Timing the date of a dividend payment from a company can determine both the amount and the due date of the tax payable. This may be a particularly useful strategy in a close- or family-owned company. The dividend allowance — the amount you can receive tax-free — has been reduced to £500 for the 2024/25 tax year. Above this, dividends are taxed at the following rates: 8.75% for basic rate taxpayers 33.75% for higher-rate taxpayers 39.35% for additional rate taxpayers Your tax band is determined by your total income, including salary, savings, and dividends. Accelerating payment The timing of the dividend payment may have a marked impact on the directors’ and shareholders’ personal tax situation. A dividend is not paid until the shareholder receives the funds directly or the dividend amount is put unreservedly at his or her disposal, for example by a credit to a loan account on which the shareholder has the power to draw. If the personal tax allowance and basic rate band for a tax year have not been fully utilized towards the end of the tax year, payment of a dividend may mean that the unused portion can be mopped up. Example Graham is the sole director and shareholder of his limited company. In the 2024/25 tax year, he earns a salary of £25,000. He’s considering whether to pay a dividend before 5 April 2025. Personal allowance: £12,570 Basic rate band: Up to £50,270 Remaining allowance in basic band: £25,270 If Graham pays a £25,770 dividend: £500 is tax-free (dividend allowance) £25,270 is taxed at 8.75% = £2,166.13 Remaining £500 is taxed at 33.75% = £168.75 Total dividend tax: £2,334.88 This timing allows Graham to take advantage of the lower 8.75% rate before crossing into the higher band. Delaying payment Where the shareholder already has income exceeding the basic rate band in one tax year, delaying the dividend until the start of the next tax year could save tax. Example If Graham already earned £50,000 in the 2024/25 tax year, his basic rate band is nearly used up. If he pays a £27,000 dividend before 5 April 2025: First £500 tax-free Remaining £26,500 taxed at 33.75% = £8,943.75 But if he delays the dividend to 2025/26, and earns only £25,000 in that year: All £27,000 dividend income remains within the basic rate band £500 is tax-free Remaining £26,500 taxed at 8.75% = £2,318.75 Tax saved by delaying: £6,625 Additionally, the tax is due one year later — giving a useful cash flow advantage. Fluctuating income Dividend payments can often be timed to smooth a director/shareholder’s earnings year-on-year. Broadly, where profits fluctuate, a company could consider declaring and paying dividends equally each year, or by declaring a smaller dividend in the first year (when profits are higher) and treating the remainder of the payment as a shareholder loan. At the start of the next tax year, a further (smaller) dividend can be declared, which will repay the loan. Care must be taken with this type of arrangement, not least because the loan must be repaid within nine months of the company’s year-end to avoid a tax charge arising on the company. The family business potentially offers considerable scope for structuring tax-efficient payments to family members using a mixture of both salary and dividends. A pre-dividend review may be particularly beneficial towards the end of the company’s year-end. Additional Note: ITA 2017, s 8 and s 13A; F(No 2)A 2017, s 8; CTA 2010, s 455