In this article, we give you an overview of the basics of limited company tax as written by the senior accountant from Dolan Accountancy. This includes the various taxes you will be liable to pay (or collect) as a limited company, and when you have to pay them.
dividends
Readers questions: My year-end is 31st January, I have two companies, can I pay dividends out of one? We have made £160k profit so far this year.
[continue reading…]The tax on dividends is paid at a set rate that is set by the HMRC. Every new tax year, as with other taxes, the rates change. The biggest change in the last couple of years is the tax-free dividend allowance being reduced from £5,000 to £2,000.
Readers questions: I’m in my first year of running my limited company, and I am the Director and only employee. I haven’t paid myself any salary in this tax year yet, because I earnt a salary in this tax year before I set up my business. My Limited Company will reach it’s one year anniversary in mid-May 2020. My question is, is it tax efficient to pay myself £8632 next financial year, and before mid-May when my Limited Company reaches its 1st anniversary, to minimise corporation tax payment?
[continue reading…]Reader’s question: As the sole director of my own company, if I pay myself £200 per week does this mean my corporation tax will be less? And what amount of dividends can I take?
Readers question: I have a limited company and I have taken 1% dividend for my grandchildren to pay for their school fees. I have opened a trust account where this 1% will be put into so let’s say the cost of the fees is £17,000 per annum, how much money do I need to transfer into this trust fund? Also how much corporation tax do I need to pay on this transfer?
Readers question: I have set up my own catering company at the moment and I am doing the food in a large Irish bar in Edinburgh. I will be paying my employee and buying all the food stock etc. My query is, would I be better off being an employee of my company and paying tax NI as normal with the addition of employer NI, or would I be better to take dividends monthly as my salary, my salary will be £40,000 per annum.
Here are some tax and finance tips which could help you save money as a limited company owner, based on our experience of running limited companies, and dealing with accountants and tax advisors over the past 15 years.
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Readers Question: I have a trading company with a high level of retained earnings. Rather than liquidate, I am thinking of taking £500k in dividends (grossed up to £555k) and then making a donation to the charity of say £500k (adjustable for tax efficiency), which would extend my basic rate band by £625k. Am I correct in thinking that this combination of dividend and charitable donation is a tax efficient way of charitable giving, in the sense that I would avoid the higher rate dividend taxes?
As a limited company director, you will usually pay yourself a small salary, and draw down most of your income as dividends. Are there any rules which govern the level of salary you take, and what are the tax implications?
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With over 1.8m limited companies operating in the UK today, compared to 3.3m sole traders, we look at the advantages afforded to business owners who decide to trade via their own limited companies.
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There may be a time that you have to say goodbye to your small business, whether it’s because you’re a serial entrepreneur and want to make money from your successful business or you simply want to get rid of your struggling business. The key to successfully selling your business is to devise an exit strategy. An exit strategy will help you decide how much money you can make from a profitable business or how much of your initial investment you can retain from a struggling business.
Limited companies can distribute profits they generate via dividends to company shareholders. However, you must ensure that all dividend distributions are legitimate, otherwise you could fall foul of HMRC.
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A leading accountancy firm has published some simple tax planning ideas to help small business owners and contractors reduce their tax liabilities in future years.
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When deciding between contracting via an umbrella or limited company, the main factors to consider are typically; the tax differences between the two structures, your IR35 status, and how much perceived ‘paperwork’ is involved. One service provider says that 50% of umbrella company contractors would be better off by incorporating.
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If your limited company makes a dividend declaration, you must record the fact in the company records, and in most cases provide each shareholder with a dividend voucher.
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