We have added a simple dividend and corporation tax calculator on our main dividend page on the website.
The calculator contains the following input fields:
- Company Revenue
- Other Running Costs & Expenses
- Corporation Tax Rate
- Financial Year
and calculates the following:
- Company Net Profit
- Corporation Tax Due
- Net Dividend Amount (money available for dividends)
- Dividend Tax Credit
- Extra Personal Tax to Pay
Using the calculator is really easy, you just have to enter or select values to see the output. You don’t even have to click a submit button as the calculated values change dynamically.
The calculator works for basic and higher rate tax payers ie incomes up to £150,000 per year.
A bit about dividends
Dividends provide an efficient way of extracting funds from a limited company because they are not subject to national insurance (NI). For this reason, it is common for IT contractors, for example, to pay themselves a very small salary – something in the region of £7000 per year – and to take the rest of their income in the form of dividends.
If your salary plus dividend income comes to less than the higher rate tax threshold (about £32000 for the financial year 2013-2014), there is no tax at all to pay. On the other hand, if your dividend income takes you annual earnings over the tax threshold, you will have to pay some additional tax.
For example, if your salary is £7000 and your dividend income is £30000, giving a total income of £37000, you will have to pay 25% tax on £5000 (£37000 – £32000), which comes to £1250.