itcontractors

[itcontractors]

How to use a dividend tax calculator (UK)

If you are a limited company shareholder, any income you receive from the company is in the form of dividends.

Dividends are distributed according to the percentage of shares the shareholder owns in the company.

So, how are they taxed?

Dividends are taxed via the annual self assessment process. They fall into your highest tax band - after any other sources of income have been taken into account (such as a salary).

Unlike salaries or any other form of income, dividend tax applies to any dividends you receive.

To find out how much tax you have to pay on dividends, try this useful dividend tax calculator.

Simply enter your salary and dividends for the current UK tax year, and find out how much additional tax you have to pay.

[itcontractors]

Accountants for contractors

Find the best provider

If you're thinking about starting out as an IT contractor, the first thing you'll probably need to decide is how to trade.

Broadly speaking, there are two options:

Set up a limited company

Work through an umbrella company

We'll address 2) in a future post, but for now - let's look at what's involved if you want to trade via your own company.

Setting up a company is very easy - you can do this for a mere £12 if you go direct via Companies House.

But, what about looking after the company, working out your taxes, and keeping your accounts in order?

Unless you're an accountant yourself, it is a tall order to try and do this on your own.

This is why almost all limited company contractors hire accountants to look after their books and deal with the tax authorities.

A good accountant will take care of everything, from setting up your company in the first place, to filing your tax returns.

Given how important an accountant is to the health of your business - and your peace of mind, you need to pick the right one.

Although price is just one factor to consider, it is nevertheless an important one. With typical monthly fees ranging from £50 to £200, the difference can cost you £ 1000s each month.

You can compare providers here.