So, MyCo has been paying me £4 / week for the use of my home office.
That's way below market rate, though. Seems like the government thinks a room should be worth £7500 a year, starting next year, based on Rent a Room. Maybe that's too high outside of London, though. I'll charge a nice conservative £4K / year to rent a room to MyCo Ltd. Hard to argue you could rent a room for less than that, most places, so it would be hard for the tax man to say it is above market rate. After all, it includes utilities, etc.
That will be £2K each for my wife and I. Sure, we'll pay basic rate tax on it (we're staying below the higher rate threshold). It is rental income, after all. Rent a Room doesn't apply for businesses. So, 20% on our income tax, but it is rent, not salary, so no NI. Total tax hit £400 each, £800 total.
It is also a legitimate business expense. So no CT. And no dividend tax. If the company didn't pay market rent, it would have an extra £4K profit. £800 CT. £3200 to disperse as dividends, incurring dividend tax of £240. Total tax hit £1040.
Sure, it isn't a lot. But why should anyone expect me to subsidise MyCo with virtually free premises? After all, the government has decided to stick it to MyCo, so I might as well, too. If it saves a little on taxes, all to the good.
That's way below market rate, though. Seems like the government thinks a room should be worth £7500 a year, starting next year, based on Rent a Room. Maybe that's too high outside of London, though. I'll charge a nice conservative £4K / year to rent a room to MyCo Ltd. Hard to argue you could rent a room for less than that, most places, so it would be hard for the tax man to say it is above market rate. After all, it includes utilities, etc.
That will be £2K each for my wife and I. Sure, we'll pay basic rate tax on it (we're staying below the higher rate threshold). It is rental income, after all. Rent a Room doesn't apply for businesses. So, 20% on our income tax, but it is rent, not salary, so no NI. Total tax hit £400 each, £800 total.
It is also a legitimate business expense. So no CT. And no dividend tax. If the company didn't pay market rent, it would have an extra £4K profit. £800 CT. £3200 to disperse as dividends, incurring dividend tax of £240. Total tax hit £1040.
Sure, it isn't a lot. But why should anyone expect me to subsidise MyCo with virtually free premises? After all, the government has decided to stick it to MyCo, so I might as well, too. If it saves a little on taxes, all to the good.
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