ltd, salary, tax etc

[J.C.E]

I am a limtied/vat reg comp- although it always gets me thinking/confussed!

Basically my accountant set me up to draw a salary of £680 odd so I am below the limit of income tax- I get this

I get a can take a dividence (and so does my mum as a shareholder) - i sort of get that

so does that mean- if I do not increase my salary above £680- i will not pay any income tax at end of tax year- and poss only NI?

obvisouly vat returns every 3 months- I undertstand

I undertstand this will possibly make getting my 1st mortgage a bit more tricky as not all lenders take the figures in a lim company into account and they want to base on a taken salary.

Also where does this put me in 100years time when I am retired and all my money is 'in the company' -how do I 'get my hands on it'

just looking to understand it all a bit more!

Ta

 

[Octopus]

We remortaged last month ....... we have over 85% equity in our house ......... they still treated me like a leaper and the misses who works for the NHS had to provide proof of all her hours, extra payments etc....

We got the money , but it was tough. Our borrowings now are 1.5 x our combined incomes

 

[plugsandsparks]

I am Ltd, vat reg, 2 directors/shareholders with two classes of shares to allow an asymmetric dividend payment schedule.
the choice of salary is very important and your accountant will advise.
I am quite old and have significant NI already in the pot, not bothered about benefits if i cannot work etc etc - so i pay myself (for my own personal reasons ) a very small amount and well below the lower earnings limit for NI. As a young person i (check with accountant) suggest you may wish to pay at least just above the lower earnings limit for NI so you build up your contributions for pension and other benefits.
At the end of the year because you have paid yourself so little you will generate (hopefully) a healthy profit. Well 19% of this is due to be paid as corporation tax, the rest is available as dividend or retained profit.
If you decide to withdraw money as dividend you will first use up your remaining personal allowance, then you use up the dividend allowance and finally you start to pay the dividend tax at the appropriate rate which is 7.5% for basic rate tax payers.
Of course if you pay yourself a healthy company pension this is free of both CT and dividend tax.
An accountant will look at the overall situation that is unique to you and your other shareholder and come up with a plan to pay the most appropriate tax, i.e. the lowest legally allowed, you can of course pay more if you are embarrassed by how little tax you pay but thats up to you and your accountant to juggle the moral dilemna.

I am a bit of a geek wrt this stuff and do my own accounts, pension, self assessment etc etc but my own situation is almost unique and will not suit all.
hope this gives a flavour of the possibilities.
cheers P&S

 

[Squid]

We remortaged last month ....... we have over 85% equity in our house ......... they still treated me like a leaper and the misses who works for the NHS had to provide proof of all her hours, extra payments etc....

We got the money , but it was tough. Our borrowings now are 1.5 x our combined incomes

Jeeez a £500k mortgage.......... ;o)))))))

 

[Squid]

I am Ltd, vat reg, 2 directors/shareholders with two classes of shares to allow an asymmetric dividend payment schedule.
the choice of salary is very important and your accountant will advise.
I am quite old and have significant NI already in the pot, not bothered about benefits if i cannot work etc etc - so i pay myself (for my own personal reasons ) a very small amount and well below the lower earnings limit for NI. As a young person i (check with accountant) suggest you may wish to pay at least just above the lower earnings limit for NI so you build up your contributions for pension and other benefits.
At the end of the year because you have paid yourself so little you will generate (hopefully) a healthy profit. Well 19% of this is due to be paid as corporation tax, the rest is available as dividend or retained profit.
If you decide to withdraw money as dividend you will first use up your remaining personal allowance, then you use up the dividend allowance and finally you start to pay the dividend tax at the appropriate rate which is 7.5% for basic rate tax payers.
Of course if you pay yourself a healthy company pension this is free of both CT and dividend tax.
An accountant will look at the overall situation that is unique to you and your other shareholder and come up with a plan to pay the most appropriate tax, i.e. the lowest legally allowed, you can of course pay more if you are embarrassed by how little tax you pay but thats up to you and your accountant to juggle the moral dilemna.

I am a bit of a geek wrt this stuff and do my own accounts, pension, self assessment etc etc but my own situation is almost unique and will not suit all.
hope this gives a flavour of the possibilities.
cheers P&S

As above but my accountant issued 12 shares one for every month and did a rolling calculation with income and expenses I had a DD setup for the minimum salary then I would be informed of how much I could transfer from the business to my personal account in expenses and dividends, the expenses aren't taxable so i claimed for travel, breakfast and lunch, you need a printer/computer for business use expense it stationary and stamps stock up before Christmas expense it Christmas cards as well, I even claimed for a Christmas tree and a couple of bikes over the years.

 

[Squid]

Forgot to add an office in your house allows you a % to claim for bills, cleaner, window cleaner.

 

[Octopus]

Jeeez a £500k mortgage.......... ;o)))))))

hum. Have you borrowed Diane Abbott's calculator?

 

[Squid]

hum. Have you borrowed Diane Abbott's calculator?

You mean its to low!?

I thought you where a £150k per year electrician looks like you are further up the ladder than I thought ;o))))))

 

[Octopus]

You mean its to low!?

I thought you where a £150k per year electrician looks like you are further up the ladder than I thought ;o))))))

Ha ha ha - so far from the truth.

 

[Octopus]

You mean its to low!?

I thought you where a £150k per year electrician looks like you are further up the ladder than I thought ;o))))))

So £150K divided by 42 weeks @ 40 hours per week is about £95 per hour

If I could do £95 per hour , I would do a 2 day week!

 

[Squid]

Stick to a 35 hour week and don't work yourself in to a grave, I just love young rich widows.......... ;o))))))))

 

[Leesparkykent]

Forgot to add an office in your house allows you a % to claim for bills, cleaner, window cleaner.

Only £4 a week IIRC.

 

[Squid]

Every £ is a prisoner.........

 

[derek]

Only £4 a week IIRC.

You can claim more than £4 per week for use of home as office, the £4 figure is the amount HMRC will accept without any proof being required and has those who use their kitchen table to do their paperwork in mind.
You could read the various BIMs in the HMRC website offering guidance on this, BIM47825 - Business Income Manual - HMRC internal manual - GOV.UK - https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47825 would offer some examples especially if you have a room as a dedicated office.
You should check the possible consequences of Capital Gains Tax on business use on a property you own and then might sell at a later date, I was led to believe that this can be mitigated by allowing a small percentage (of the office or whatever else you are claiming for) for occasional private use, so for example my office could also be used to occasionally read a book in peace.

I would suggest you don't believe anything I have said and consult with a qualified chartered accountant.

 

[lurch]

amazing that people do not do there home work and start asking questions after the event. . have a look at this and google around abit. The internet is a valuable resource if used properly Sole Trader vs. Limited Company | Companies MadeSimple - https://www.companiesmadesimple.com/sole-trader-v-limited-company.html

 

[Octopus]

amazing that people do not do there home work and start asking questions after the event. . have a look at this and google around abit. The internet is a valuable resource if used properly Sole Trader vs. Limited Company | Companies MadeSimple - https://www.companiesmadesimple.com/sole-trader-v-limited-company.html

I've just used the calculator on that link - sure it suggests I would be slightly better off, but makes no allowance, as far as can see, for the additional time and / accountancy costs you will have to allow for or time that you will need to spend doing more work in the evenings.

Being SE means 1 return per year.

Ltd or VAT reg means much more to do ....................