Calculating Student loan

[pmeswani]

Firstly thanks for the replies.

I thought this 25% was to cover the companies taxes and my personal ones.

You have to be careful of the wording.

If you go above the Income threshold, your company will pay the appropriate Income Tax and National Insurance Tax for the Employer and the Employee. If you decide to do some work on the side (outside your business), you, as Pippin, are are liable for the taxes, and not your LtdCo. Any tax payments that are flagged via your Self Assessment is payable by you, and not your Ltd Company. So, for example, if you have Shares in a few companies, and the dividend payments puts your income above the income threshold, you, as Pippin, pay the taxes, not your Ltd Co. (I hope I am right on the last bit, but please correct me if I am not).

Also what NLUK said.

[northernladuk]

A very simple starter..

The company money belongs to the company. From it the company pays it's taxes and what it owes to you. It belongs to the company until it leaves its account.

Your money belongs to you. From it you pay your taxes. It is topped up from what the company owes you. It is not yours unless it is in your bank account.

I have put a gap between the two statements to try and emphasise the fact the two are different and do not co-habitate, can't be merged, have no grey areas etc....
Obviously this is a hugely simplistic model but if you can get your head around this you are less likely to drop a bollock.

Understanding this however means you can answer very important questions like... where do I pay my personal tax from etc....

Not sure anyone can put you right on your situation as it does require some understanding and can be v complicated. Better to speak your accountant, read any guides to the right about financial elements and get grounded understanding and then ask specific questions.

This percentage approach to your money also sounds wrong to me. Do you have a warchest? Do you know how much it is and how much it will grow in the next few months? Percentage approach wont help you here.

Does your accountant give you a spreadsheet to track all your income and outgoings? Check the one on the SJD website as an example. This way you can better track and understand your situation.

You are legally reponsible for the financial side of your company, not your accountant, so do have an obligation to understand it I am afraid.

[pippin]

Firstly thanks for the replies.

I do have an accountant, I've probably explained it badly though or my understanding is a little off.

I'm not drawing 75% salary and 25% dividends. 75% of what the company earns is what I was led to believe I should draw, that 75% being made up of salary and dividends, the remaining 25% stays in the companies accounts to cover the taxes. I thought this 25% was to cover the companies taxes and my personal ones.

I appreciate my understanding my be wrong though and another appointment with my accountant may well be needed, in the meantime however if someone could explain where I'm going wrong / how others do it (beyond just posting smilies) I would really appreciate it, not least as I'd feel more confident of asking the right questions when I go to the see the accountant.

Many thanks

[northernladuk]

I do the 'usual' practice of drawing 75% of the companies profits as a wage

That is NOT usual

(that 75% broken up as keeping me in the lowest tax bracket and whats left as being as a dividend).

This does not describe what you said in the first line. You gotta be clear. 75% of profits as wage != splitting it in to PAYE and divis.

[Greg@CapitalCity]

So is there an easy way of getting a good idea what my student loan bill will be so I can start putting something aside for it?

Yes, there is. For the tax year, estimate your total gross salary, add your total gross dividends (net dividends x 10/9), deduct £15,000, and multiply the result by 9%.

From your post I take it the 75% you take from your business keeps you below the higher rate earnings threshold for dividend tax - in which case 25% will be plenty for your company & personal taxes (as your personal tax will be £0). Keep in mind the student loan repayment will need to come from your personal bank account, so to ensure you get your tax planning right, just allow for keeping some personal funds aside to cover this.

[Jeremiah@RHJAccountants]

You may find this of benefit which is a link to the Student loans Company website

How and when you repay

You can choose to pay through your PAYE code so as you are taking a salary from your company it will come off this each month. If you have an accountant they can process the payroll for you and take care of this very easily.

Or you can pay on your self assessment each tax year if you decide not to pay through your PAYE tax code. again if you have an accountant they can prepare you self assessment and take care of it you will need to notify them that you are due to repay your student loan.

So really speak to your accountant or get one as these are questions they can help you with.

Also some tax planning may be in order for you as the 75% salary and 25% dividends?

[MrRobin]

Student loan = 9% of gross pay over £15k

Unless you have made a typo, you have a dangerous misunderstanding of what taxes are due and how they should be paid. Get in touch with an accountant ASAP

[cojak]

WHS



I think that you should get an accountant who will explain it all to you.

Then you'll know why we're all going

[stek]

The 25% left in the company accounts is there to cover the company and personal taxes

[pippin]

I'm still fairly new to the whole contracting/running my own company thing, and forgot to take into account student loans payments. I do the 'usual' practice of drawing 75% of the companies profits as a wage (that 75% broken up as keeping me in the lowest tax bracket and whats left as being as a dividend). The 25% left in the company accounts is there to cover the company and personal taxes, but I'm guessing wont cover my student loan payments as well. So is there an easy way of getting a good idea what my student loan bill will be so I can start putting something aside for it?