Reply to: Corporation Tax on Limited Company

[Drewster]

Is there a quick and easy guide or link out there that explains for newbies how to calculate tax for PAYE, Dividends and Corporations Tax ?

I get a bit confused over the 3.

I keep reading you should pay yourself a low yearly salary and then take the rest as dividends. If so, how do you work out PAYE (incl NI) on that basis (e.g. salary of 5k) and then Dividends / Corporations Tax at year end ??? A good spreadsheet model or calculator would be helpful so it all makes sense.

All suggestions welcomed.

Hi,

Thanks for your reply.

I have to say that I'm not sure why you replied if you weren't prepared to just respond to the question rather than have a poke to suggest I don't understand the aspects of the question posed. All I asked was if anyone knew of any sample models or spreadsheets etc that showed you how to do it. Not every question asked on these forums needs to be met with a smart reply like 'go see an accountant' as if the person asking it is dumb. Show some respect for the people who are new and are just looking for people to share their experiences.

You said you were a newbie
You said you were confused
You asked for suggestions

I showed you every respect and attempted to provide a helpful suggestion
I explained why I thought you should go to an accountant
I gave you the benefit of the doubt about being dumb/not ie I implied that you would be able to learn what you patently don't understand at the moment

You showed me no respect

Listen to what people have told you - but don't expect any helpful answers from me in future.

Yours
Pissed Off with Dumbass Newbie Mavster07

[northernladuk]

Hi,

Thanks for your reply.

I have to say that I'm not sure why you replied if you weren't prepared to just respond to the question rather than have a poke to suggest I don't understand the aspects of the question posed. All I asked was if anyone knew of any sample models or spreadsheets etc that showed you how to do it. Not every question asked on these forums needs to be met with a smart reply like 'go see an accountant' as if the person asking it is dumb. Show some respect for the people who are new and are just looking for people to share their experiences.

But he has gone one better. Instead of giving you some half assed links to spreadsheets that make even less sense and could lead you in to making a very expensive hash of it he has used his experience to send you off in the correct direction. This is something we see a hell of a lot of on here and people get in to some real states. His suggesting is the best one for you....

Not that listening is your strong point looking back at some of the long and slightly (cough) incorrect posts you have so lovingly drafted for us.

But anyway.. he is right...

[MarillionFan]

Is there a quick and easy guide or link out there that explains for newbies how to calculate tax for PAYE, Dividends and Corporations Tax ?

I get a bit confused over the 3.

I keep reading you should pay yourself a low yearly salary and then take the rest as dividends. If so, how do you work out PAYE (incl NI) on that basis (e.g. salary of 5k) and then Dividends / Corporations Tax at year end ??? A good spreadsheet model or calculator would be helpful so it all makes sense.

All suggestions welcomed.

Start with this <snip>
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[MarillionFan]

Get an accountant. They'll help you work out the best way.

If you're based in Hampshire, PM and I'll send you mine, they're pretty good and reasonable.

Hi,

Thanks for your reply.

I have to say that I'm not sure why you replied if you weren't prepared to just respond to the question rather than have a poke to suggest I don't understand the aspects of the question posed. All I asked was if anyone knew of any sample models or spreadsheets etc that showed you how to do it. Not every question asked on these forums needs to be met with a smart reply like 'go see an accountant' as if the person asking it is dumb. Show some respect for the people who are new and are just looking for people to share their experiences.

[Drewster]

Is there a quick and easy guide or link out there that explains for newbies how to calculate tax for PAYE, Dividends and Corporations Tax ?

I get a bit confused over the 3.

I keep reading you should pay yourself a low yearly salary and then take the rest as dividends. If so, how do you work out PAYE (incl NI) on that basis (e.g. salary of 5k) and then Dividends / Corporations Tax at year end ??? A good spreadsheet model or calculator would be helpful so it all makes sense.

All suggestions welcomed.

Suggestion 1: Speak to an Accountant
Suggestion 2: ..... there is no suggestion 2. Seriously if you get confused over them its because you don't really understand them, the differences and the possibilities.... An accountant should/will be able to explain them to you and then over time (when you have more than a basic grasp) you may decide that you no longer need an accountant (even though its his job to keep up to date on changes etc and give you advice and even to take some of the faff out of it (my hourly rate is better than his, it takes me longer to do the stuff he does.... so it is Cheaper to pay him)

Please go see an accountant....

Is there a quick and easy guide or link out there that explains for newbies how to calculate tax for PAYE, Dividends and Corporations Tax ?

I get a bit confused over the 3.

I keep reading you should pay yourself a low yearly salary and then take the rest as dividends. If so, how do you work out PAYE (incl NI) on that basis (e.g. salary of 5k) and then Dividends / Corporations Tax at year end ??? A good spreadsheet model or calculator would be helpful so it all makes sense.

All suggestions welcomed.

[Nixon Williams]

It is very easy to reduce your corporation tax to zero, although this may not be the most tax efficient.

Our advice to our clients is not to worry about individual taxes (Corporation tax, VAT, PAYE, NIC etc) but to concentrate on getting the overall tax payments as low as possible.

The aim is to maximise your retained income, do not get too worked up about a high corporation tax bill, as the other tax payments should be lower.

I hope this helps.

Alan

[kingcook]

Hmmmm... maybe it would be worth getting an accountant at least for now

[Clare@InTouch]

If you're inside IR35 then you take the total value of your cash received during the year, less 5% for admin costs, less pension contributions and motor & travel (assuming 24 month rule OK) and the balance goes as wages plus employers NI.

This can still sometimes mean there is taxable profit as CT is calulated on an accruals basis (so what you've invoiced regardless of whether it's paid) whereas IR35 is calculated on a cash basis.

If you're looking to keep taxes low, pension contributions are usually a good idea.

However, I'd suggest you get an accountant even if it's just to check your year end accounts and IR35 calculation.

[sweetandsour]

Since you are posting on here to ask a group of random strangers questions like this

Have i got this right....

CT is payable on company profits after business expenses, so i'm assuming my own wage is a business expense.

So... as long as i pay me my wage using all money that the company has (hence £0 company profit), i won't actually pay any corporation tax?

Are you sure this is a good idea?

Nope - not got an account. Going to be doing it myself (i have previous experience of book keeping and VAT).

Thanks

Book keeping and VAT are easy. Corporation Tax is not. You wont have any corporation tax to pay if you pay yourself everything as salary but you will still need to do the calculations and returns.

[kingcook]

Probably going to buy Sage Payroll, that should be able to do the math (for NI)

[Moscow Mule]

Don't forget to factor NI (Both employer & employee) in you calculations.

[kingcook]

Sorry, i should have said that i'm assuming that i'll be within IR35. Obvioulsy, if/when i get a contract that is outside IR35, then i'll be looking at taking money as dividends.

Nope - not got an account. Going to be doing it myself (i have previous experience of book keeping and VAT).

Thanks

[sweetandsour]

But with my own ltd co, i can register on the VAT flat rate scheme, and earn extra money from that.

Also i've read something about claiming 5% of annual turnover for admin fees?? (need to read up more on that - unless someone here can tell me)

Taking all the money as salary is not the most tax efficient approach. But if you want to do that then you are correct - you will not have any CT to pay.

Do you have an accountant?