Do I really pay less tax as a limited company

[Forbes Young]

I guess I'm one of the "few"...

Operating through their own ltd company doesn't suit everyone of course eg those workers who are on very short term contracts, those earning low incomes and those who simply cant be bothered with the hassle of owning a ltd company. So to operate via an Umbrella or operate as a Sole Trader are other options available.

[CanadianExpat]

Yes - effective diagram. The % of take home remuneration for a contractor with net profits much lower (say around £40k) is much higher again compared to the figures shown in the diagram, due to the fact that no income tax on dividend income is payable until the £41k tax threshhold has been breached (so approx a £8k salary and £30k net dividends can be taken without paying any income tax).

I think (?) that this is picked up in the diagram. There's a worked example in the book, the contractor's night job.

[ItRYmyBEst]

Lets say I earn 100k the 1st year and pay myself the 40k or so and the company pays 20% of 92k. If I don't work the next year what is the max can I pay myself leaving no funds left in the bank?

[PerfectStorm]

Lets say I earn 100k the 1st year and pay myself the 40k or so and the company pays 20% of 92k. If I don't work the next year what is the max can I pay myself leaving no funds left in the bank?

The company will pay 20% of the 100k, then you take your dividends etc from that
So 80k is left, you take 10,000 salary + 32k dividends (or whatever it is)
That leaves 38,000

You could just have the full 38000 the following April when the new tax year starts. If I'm reading your post right.

[TheCyclingProgrammer]

The company will pay 20% of the 100k, then you take your dividends etc from that
So 80k is left, you take 10,000 salary + 32k dividends (or whatever it is)
That leaves 38,000

You could just have the full 38000 the following April when the new tax year starts. If I'm reading your post right.

Salary is pre tax, not post tax.

£10k salary, £18k CT, £32k ish dividends. £40k profit remaining to take the following year. £82k take home over two years.

[ItRYmyBEst]

Salary is pre tax, not post tax.

£10k salary, £18k CT, £32k ish dividends. £40k profit remaining to take the following year. £82k take home over two years.

Well thanks all, its working out nicely!

[stek]

Lets say I earn 100k the 1st year and pay myself the 40k or so and the company pays 20% of 92k. If I don't work the next year what is the max can I pay myself leaving no funds left in the bank?

Better budget for 25k earnings given the level of competence you've shown so far...

[ItRYmyBEst]

Better budget for 25k earnings given the level of competence you've shown so far...

Well I did better than that. This business stuff is hard and it takes some people a lot of time to understand it.

[flamel]

Well I did better than that. This business stuff is hard and it takes some people a lot of time to understand it.

Quick guide:

Year 1 Earn more money
Result - you have more money
Year 2 Earn less money
Result - you have less money

It's simple.

[ItRYmyBEst]

Quick guide:

Year 1 Earn more money
Result - you have more money
Year 2 Earn less money
Result - you have less money

It's simple.

Ok , I get it.