interest payments

[chuddy]

From a personal tax point of view, are interest payments subject to regular income tax, but not NI?

Is it better to recieve income as interest from a loan that I have given to my company or through dividends?

[Sockpuppet]

Are you paying yourself some stupidly high interst rates trying to get round tax...

GO FIND AN ACCOUNTANT....OR FLIPIN SEARCH!

You cannot pay interest to yourself by dividend as this would be paid out before profits and as we (well all of us that search) dividends are taken from profits. Also you cannot take it as a wage (which is what I assue the "or comapny" bit means).

Really, this is not a god idea. Search.

[minstrel]

Income from interest payments are only subject to income tax not NI.

Providing you stick below higher rate threshold, dividends are only subject to 19% corporation tax rather than 22% income tax.

Even if you did have £500,000 of personal wealth you could lend the company to get a £40k pa return at 8%, or felt that you could get away with lending your company a grand and claiming £40k pa (whatever x thousand % return that is) you would still be better off paying the CT on profits and distributing dividends.

I agree with Sockpuppet - you need to speak to an accountant or do more searching.

[chuddy]

Would it be more tax efficient to make sure that my taxable income from 0-2150 comes from interest? This would only be taxed at the 10% income tax rate. Little academic I know since it will be a small amount of money, but just wanted to know that I understand what you are saying.

Save enough money to buy me a Nintendo Wii lol

[tim123]

I don't understand this deal.

Your company is not a Bank. Loaning it some money and conjuring up some interest from it as income, doesn't actually generate this income. Where does it come from?

tim

[Ardesco]

A guy called Chuddy wh comes up with pants ideas..... Why am I not surprised...

[chuddy]

sorry, my mistake, I thought that all dividends earned below upper limit were taxable at 32.5%, but they are subject to only 10% tax at the £1 - £2150 level - just like earnings from interest.