Not taking money from Business account

[Software]

Hi All,

I am new to contracting and i have the following question...

Situation:
I have enough money in my Personal account which is sufficient for me for the whole year.
I am now in my first contract and i am getting money in my business account every month.

Question:
1. Can i accumulate money in my business account, without taking salary and dividend on each month?
2. During the month of Tax filing, can i calculate Dividend and Salary and take in a single time?

Please reply. Thanks in advance...

[SueEllen]

Get yourself an accountant or wait until Monday when the usual helpful accountants on the board come along.

[johnvoisey]

Hi All,

I am new to contracting and i have the following question...

Situation:
I have enough money in my Personal account which is sufficient for me for the whole year.
I am now in my first contract and i am getting money in my business account every month.

Question:
1. Can i accumulate money in my business account, without taking salary and dividend on each month?
2. During the month of Tax filing, can i calculate Dividend and Salary and take in a single time?

Please reply. Thanks in advance...

Assuming you are operating in the uk as a ltd co and not working as a sole trader, for which different arrangements apply, of course your limited company, which is a legal entity quite separate from you, is able to accumulate funds in its business account...

(if you were a sole trader then every penny in your business account would have to be accounted for under your name at the end of the tax year with no way out. And if the total in your personal and business account means you are over the 50% tax threshold, tough).

If you are using a ltdco and you leave funds in its tender care beyond the company accounting date you are going to find your company liable to corporation tax on these "retained funds", and the balance then gets called "reserves". But if you have not been particularly efficient in your tax planning, the tax levied on the company in order to leave that money in its tender care until the next personal tax year may be a LOT less than the tax you might end up paying if you take the funds out as salary / dividends in this one.

I hope this helps (!)

I also cast an envious glance in your general direction. I've only just returned to freelancing having (stupidly, I now realise) been persuaded to give it up in 2006 for a "permanent" job that paid a lot as permanent jobs go, but crashed and burned in the credit crunch, and then panicked and run for cover in another permanent job when there was nothing freelance at the height of said crunch ...

I can JUST ABOUT remember when I was last in the position you describe. About 1998 I think, before Gordon Brown had managed to make himself comfortable in number 11 and commence his war upon the freelance sector.

[BolshieBastard]

Hi All,

I am new to contracting and i have the following question...

Situation:
I have enough money in my Personal account which is sufficient for me for the whole year.
I am now in my first contract and i am getting money in my business account every month.

Question:
1. Can i accumulate money in my business account, without taking salary and dividend on each month?
2. During the month of Tax filing, can i calculate Dividend and Salary and take in a single time?

Please reply. Thanks in advance...

Your co can retain as much money as it wants and while it is good to retain some (for bills and when out of work) its not good to leave everything completely untouched.

Unless you have other income which, when added to any income you take from the limited co, would take you into the higher rate tax band, why not take some money out to maximise you position?

Leaving money in a company just because you dont want to take it out isnt a good idea.

You can take salary and dividend at the same time if you wish. Just make sure you keep records of when your co voted the dividend and how much it was for.

[Maslins]

Agree with those above. You certainly can.

If you have no other personal income in the tax year then it'd be silly not to take out at least what you can tax free (~£7k salary & ~£31k dividends). You'd need to register the company as an employer to pay the salary, but another bonus is it'll count as a contributing year towards basic state pension (if such a thing still exists when you retire).

NB the above assumes you're outside IR35.