Reply to: Confused

[MrRobin]

why?
I assume you say this because anything more = 40% tax.

Anything that you spend out of your own pocket that can be regarded as business expenses can be reinbursed to you out of the company before profit is calculated (and 20% CT applied)

[MrRobin]

My understanding is that this amount is not tax free.. you pay yourself dividends up to the £33k point at Basic Rate (22%) - anything above that point is taxable at 40% so best (most tax efficient) to leave in the company (unless you need it / don't mind paying the 40%).

No, divis are simply taxed at the 20% CT rate on profit. Anything above the £33k will attract the income tax too. Since when you leave the money in the company it has already been taxed at 20% on profits you will be paying the 10% (now 18%) extra on company wind up.

[RightLaugh]

Start running up some big expenses

why?
I assume you say this because anything more = 40% tax.

[xoggoth]

Agree company for pensions as avoids employer NI, although under current rules this can be challenged by HMRC. shout99 has had some useful guidance on this in the past. Do a search there.

On insurances I was once told that makes no difference on paying as taxable anyway, but there used to be some advantage to doing it through company if you actually had to claim. Forget what it was but worth a few more checks.

[MrRobin]

Start running up some big expenses

[RightLaugh]

if you then want to pay yourself some more money after paying full dividends what else can you do to be tax efficient?

[Frogstomp]

But you can take out divis without any further tax (up to the £33k ish threshold)...

So WTF am I doing keeping it in my account. In that case it's actually best to take dividends as it's basically tax free. That's what I thought from the start.

My understanding is that this amount is not tax free.. you pay yourself dividends up to the £33k point at Basic Rate (22%) - anything above that point is taxable at 40% so best (most tax efficient) to leave in the company (unless you need it / don't mind paying the 40%).

[RightLaugh]

But you can take out divis without any further tax (up to the £33k ish threshold)... By keeping the ££ in the account and then closing you will be paying an extra 10%

This conversation is obsolete though because all this changed since the last pre budget thingie.

So WTF am I doing keeping it in my account. In that case it's actually best to take dividends as it's basically tax free. That's what I thought from the start.

[MrRobin]

I thought taper relief was after 2 yrs.
So in that case the best screnario is too leave as much in the company account as possible. Which is why I'm taking out no dividends at the moment.

But you can take out divis without any further tax (up to the £33k ish threshold)... By keeping the ££ in the account and then closing you will be paying an extra 10%

This conversation is obsolete though because all this changed since the last pre budget thingie.

[MrRobin]

I thought taper relief was after 2 yrs.
So in that case the best screnario is too leave as much in the company account as possible. Which is why I'm taking out no dividends at the moment.

My bad. You are right 2 years or more is 75% relief (75% discount on 40% = 10%)

[RightLaugh]

I thought taper relief was after 2 yrs.
So in that case the best screnario is too leave as much in the company account as possible. Which is why I'm taking out no dividends at the moment.

[MrRobin]

Taper relief was where the level of Capital Gains Tax you paid on the profit gained from an asset reduced the longer you owned the asset. E.g. for contractors, you own shares in your company, when you disolve your company and there is £100k in the bank, you have made a £100k profit so you pay CGT on that. It used to be 10% with taper relief after 3 (4?) years but now is 18% no matter how long you have the company.

I understand that you can pay your spouse a salary that is proportionate to the amount of work that they do.. i.e. a company sec doing say 2 hours a week work at maybe £20/hr should only be paid £160 per month.

[Fran]

because I was advised to take it all out after 2 yrs using taper relief.
Although I thought it would be best to take a 10K salary + 25-28K dividends and leave the rest.
Was also told by accountant not to pay my wife a salary even though she's not working. FIA has advised me to pay her.

What is taper relief (not be funny, just new to this).

Also I pay my wife, but I've been told that if I ever get investigated I could get into trouble for tax evasion, unless she actually does something in the company? Any one else heard this?

[Swiss Tony]

Definitely - get the pension premiums paid from the company account. The IFA is correct.

Pensions yes, insurances no

[LordF]

Just sorting out my pension, critical illness, life insurance and medical health insurance. Accoutant has said best to do it as an individual the FIA has said put it through the company.



Surely it makes more sense to put it through the company.

Definitely - get the pension premiums paid from the company account. The IFA is correct.