These videos have really helps me make decision for my small start up company starting very soon!... answering a lot of questions other videos just don't cover. Thank you!
This is absolutely bang on the situation I’m in. Similar job salary and looking to earn about what you said in the ltd company a year. Couldn’t have matched a better video, nice one 😂
Since this video was created, there is now a wide range of accounting software for free like Freeagent, so the accounting costs for limited companies are minimised. What are some of the allowances available to directors that have a full-time job, too? Is it £2k dividend allowance per shareholder?
Rather than allowances the target area is more likely what can the company tax efficiently pay for. £2k allowance (soon to be £1000 then £500) is per individual for all dividends.
Interesting video - I suppose one way around the tax thing if you’re working as a sole trader, for example maybe doing some side hustles, would be to increase your workplace pension contributions. By increasing your pension contributions with salary sacrifice, this would bring down your gross salary and tax on your main job, and so should reduce the amount of tax you pay on your side hustle…….you get to keep more of your money, and help secure you future at the same time.
If you valued the money going into a pension you can’t touch for many years, and the salary sacrifice was legitimate then the logic as an idea is worth consideration.
At minute 4:36 you mentioned that this scenario is an entire video of its self, I was wondering if you could possibly make this video. Also explaining the best way to use profits within the business if you don't necessarily need to withdraw due to having a PAYE job already.
Great video! you've given me some extra knowledge. Do you have a video that covers a scenario where someone is in full-time employment (higher tax), wants a limited company for rental properties.? I'd like info on how to manage tax, dividend and profits of such business.
We don’t currently have any videos on property tax, it’s not currently on the list to cover, although Dan hasn’t written the idea off (as he’s a property company owner himself).
This helped a lot, I’m looking to start a side hustle but was unsure what the best way was as earning 55k in my job. I’m going to look through the rest of your vids 👍🏻
Hi Dan and team, many thanks for this and other videos. I'm keen to avoid any surprises and you have created an incredibly valuable resource. I do have one question remaining: as sole director in my limited company I will also be employed elsewhere - and that job uses all of my allowance. I therefore intend to pay myself entirely in dividends when possible and not draw any salary. I have received conflicting advice on whether being employed elsewhere means I need to register for PAYE in my limited company. What do I need to do in my limited company to make sure I am doing everything right? Do I need to register for PAYE or do I just keep a log of... erm... not paying myself? I do not want to pay an accountant or for software to run payroll if not necessary.
While we can't give you an opinion here on whether you are doing everything right, we can say you only need a PAYE scheme in a LTD if you are paying salaries (and there are some caveats there as well). So if you are the only employee and not paying yourself a payrolled salary from the company, you shouldn't need a scheme (you'd just end up reporting ;NIL; each month!)
Thank you for this, and your other videos. They are very helpful. ---- My income is around 70k FT/PAYE, trying to transition away and grow the company to be my only source of income. Why would paying yourself a director's salary be a bad idea? At least up to the first tax bracket?* ah you addressed it and I jumped the gun. What if you have a job but also making profit through your LTD? Might be using my income to fund start up costs, etc. Would be deductable from my corporation tax? Doing all my book keeping/records with Xero. Good to hear that I should expect about 1k for an accountant to look over it (and that's another deductible). Trying to be as thorough as I can but my business isn't an accountancy :)
Hi Thomas, glad they are useful! The funds you introduce aren't specifically deductible against your corporation tax, but what you spend said funds on might be. There might be a reason to pay salary regardless of the tax position, but if you've used your tax free allowance in your job you should investigate the other options, as often paying salary won't result in the best tax result (not always - very dependant on situation and goals).
@@HeelanAssociates thanks for the clear and concise answer. Yes, the money is being put in and spent. I'll have to look into depreciation on assets more.
Great video, but I guess I kept waiting till the end to find out the tax comparatives for trading as a sole trader vs. Ltd. Company! Which is more tax efficient? Any thoughts or done work on this?
Based on what you mentioned, say I start off with a sole trader then want to transition to an LLC once the business has been doing well. Do you have a video on how this process works?
HMRC don't tell them, even if you got a new tax code it won't say why. Whether you need to tell them is a more a question of morally and what's in your contract!
Thanks for the insightful video. Quick question, what if someone set-up an LTD made up of 2 directors both owning 50% of the business and they decide to take money out of the LTD after profits using dividends? will each director have a seperate dividend tax allowance ? For example one director takes out 30k and pays 8.75% dividend tax after the 500£ free allowance, the other director/shareholder also does the same. Will they both incur in 8.75% dividend tax if they take out 30k for example? or would it count as a 60k payout meaning that a higher treshold applies (33.75% for anything after 37,200) ?
Each shareholder receiving the dividend is taxed on their share only. How much tax they pay depends on their own situation. For example it’s possible one has other income and the other doesn’t, so one could pay lower tax on their dividends than the other.
Thank you for sharing , I have a question how to account if I have started last feb 2021 for my healthcare limited . I' have rang HMRC and they said I need to file a Self -Assessment before this tax year ends , will my cut off for my self assessment be until March , although ,have not yet file the accounts I have 21 months to file the accounts . Would be the coverage of my self assessment as director via dividend and salary start of books from April 6 2021 until this march 2022 . I have also income from employemnt (PAYE) from different agency . is that correct . Thank you.
That sounds like HMRC might be talking about your personal tax return, not the company's, but its hard to be sure from the info given. Tax years are 6th April - 5th April, with a tax return usually due 31/1 after the tax year end. So if you had a self assessment to do for 5th April 2021, would already be passed due (31/1/22). The company tax return is due (usually) 12 months after the company year end, although the company accounts are usually due 9 months ish after year end (usually), so you tend to do the two together. Its a bit too challenging to cover all combos here in a comment, but if you needed a direct consult get in touch with our team who could certainly help with this.
With the director's salary, do you think it's a good idea to start the PAYE scheme right away even though you don't have to physically deduct the amount right away? I'm wondering if this would be a good thing for anyone that's starting out or start with the PAYE scheme on year 2 after the submission of taxes.
Inagine I formed a limited company with me as sole director and shareholder in order to purchase one Kilo Gold Bullion bars. The bars were owned by the company and the company then leased the Gold Bars to myself for a ten year period. If during the period of my lease the Gold Bars were insured in my own name for theft and I received a cash settlement from the insurer, would I have to pay this money back to the company.
Great intro video, thank you! I've just created an Ltd for a side income of £85k, on top of my £65k PAYE from my main job. So would that mean that the best way would be to make pension contributions as high as possible, followed by dividends only (i.e. no salary)?
That’s a difficult question to answer in a comment as there would be a lot more info needed to answer, however what you describe is one common strategy.
If you are employed and start a new business with no income in the first year... can you claim expenses/ tax deduct from first job for expenses of the new business?
With a limited company it’s not really possible. If you are employed, and make a loss as a *sole trader* you may be able to offset the loss against you job income and get a tax repayment.
Hello, fantastic videos! - I have a question/scenario Say if.. My Employee income (9 to 5 job) is 55k My own LTD income is 55k My employee income is taxed at a mix of 0, 20 and 40% rates as income tax But what is the most efficient way to pay out the 55k from my LTD, would I pay 7.5% tax using dividends up to the 50k ish mark or do I need to pay the 32.5% rate for dividend income straight away because of my employee job being over 50k ish? (I’m taking the tax rates from memory here, may be wrong for the current year :) ) Many thanks for your content, great stuff
You’d pay the higher rate (33.75% as I type this) on dividends as they get stacked on top of your employed income. How to pull out the company best depends on multiple factors so hard to say I’m afraid - there isn’t a one size fits all answer to that one.
@@HeelanAssociates Thanks for clarifying! in the pool of methods I could use to pay fewer tax, does any method really allow me to have significant tax benefits (in terms of %)? For example the benefit of using dividends above is I assume I will pay 33.75% div tax instead of declaring it as income tax in which I pay 40% - that seems to me like the largest benefit. I would not use income tax for any reason in my scenario? (my assumptions are, no significant other, no child etc)
Hi I have a Ltd company and earn £83k. I am considering accepting a role also PAYE at a local school. Just wondering what the tax implications of this would be? Thank you. Your videos are great!
It would be similar to this: www.heelanassociates.co.uk/more-than-one-income-stream-how-the-tax-works/ You take any earnings (dividends salary) from company and combine with paye income on tax return
Thank you this video is very informative. But I'm stuck on couple of things 1. Everywhere I check online it says that as a ltd company and ltd director you MUST pay corporation tax, income tax and national insurance. So lets say you pay your corporation tax on the company earnings and now you're looking to take money out for personal use only through dividends. Does that mean you're breaking the law because you only pay income tax in this scenario and no NI? 🤔 2. And what is a dividend really? Like say if I were to withdraw money from my business account for personal use every month or so and by the end of the finacial year can I just let my accountant know that these withdrawals were basically dividends and then he can work out income tax on it, and this is sound from a legal perspective?
So on 1, unsure where you reading this, as its entirely possible you could pay none of those taxes, for example if the business made no money, there would be no tax to pay anywhere. There is at least a handful on scenarios I can think of off top of head where this is both legal and correct by just utilising various normal allowances. On 2, this may help ua-cam.com/play/PLkzy-8ym2nIjDS2xB0yxZYTOfz7_PE0HK.html&si=apx6GsNDdqgyi2jV Technically in order for a dividend to be legal there is a process (see these vids)
I am a ltd company and pay myself the £12500 allowance, split monthly. I am also a qualified teacher and may be going on a zero hours contract with a school to pick up some supply days. They will pay me and deduct tax and ni a source. How does this affect what i’m currently paying myself as I am obvs not paying employee tax and ni. I need the extra work but not sure if the paperwork is going to be too much
Or do I make aware to the school that they would be my second paye job and they will add a different code so I pay tax on every pound earned meaning I have no extra work to complete as a ltd company and employee of that myself?
It’s worth thinking about whether it’s actually worth it from a tax point of view to declare salary in the LTD company in this instance. There are a few factors to consider that are personal to your situation. If it is, then one of the payrolls(yours or the school) should have a tax code applied to your pay to deduct some tax before you get it. Still might not be perfect so might need a tax return to asses, or HMRC may write to you after tax year end asking for money and or adjusting your tax code.
If my annual salary is £42,000 and my LTD company makes £10,000 profit in the first year, would I get taxed just the 19% corporation tax on the profits from the LTD company, or would I have to pay 20% tax on the first £8,270 and 40% tax on the remaining £1730? Is my income from my employer and the profits from the LTD company taxed separately, or am I taxed as an individual? Thanks very much
Hi, some comments: *The company and you are taxed separately. The company pays corporation tax, you pay income tax. *Your total income in a tax year personally is bundled together and sorted out in a tax return. The amount that will be taxed for example could be your job income (you may have already covered the tax via what is deducted each month), and then any salary or dividends from the company. *This may help www.heelanassociates.co.uk/more-than-one-income-stream-how-the-tax-works/
Its so dependant on other factors there isn't a one straight answer any more. Its not a case of 'in all scenarios this is better'. Goals such as whether you want to contribute to a pension, what you want to do with the profits etc all play a part.
Thanks for this, I just set up as a LTD company and this video along with your sole trader video helped me make my mind up that I made a mistake and should trade as a sole trader! I do have a question though, as a sole trader can I offset my expenses against the tax I pay on my wage from my job? The reason I ask is Covid trashed the business I was just about to set up so ive found something new to do with the aim of learning the ropes of running my own business to give me a head start for when I can proceed with my original idea . Ive invested quite a bit of money into buying equipment but I'm going to have to learn how to use it all before I have a product to sell, then the profit margin will only be small so Its almost certain tax I pay on my business earnings in this tax year wont be enough to offset the VAT ive paid on the equipment ive bought. Thanks.
We can't give full advice in the comments here, but to say that if you had a sole trader tax loss, it is often possible to set this loss off against your employed job and potentially obtain a tax refund. Much depends on your exact circumstances, but its certainly a possibility.
A lot depends if/how you are taking money out. The answer could be (for example) that it actually won’t affect it. It would only really affect it if HMRC changed your tax code as a result of something you submittted.
Hi, thanks for this advise. Just want to asks a quick question, I'm a full time health care professional wanting to provide aesthetic threatments as a side business. I will be insured to do so, would it still be advisable to become a Ltd company in case anything goes wrong, or is the insurance sufficient protection?
I think many people form ltd companies to just add that extra level of protection in case the insurance doesn't pay out (or enough!). We've had (and have) clients in your situation that are both ltd and not with varying levels of concern about the risk. If you have another job you might find it's more efficient to be a ltd company anyway from a tax point of view, depending what you are earning.
If you are a director yes if they search. If you are shareholder more likely they’d need to know the company name. WHAT CAN YOU SEE ONLINE ABOUT A BUSINESS’ FINANCES? ua-cam.com/video/D6uU2_v73qI/v-deo.html
Thanks for this, just about to start a business on the side to my employment. Considering putting my wife as a director, can we both take £2k tax free dividends, or do we share the £2k between us?
@@HeelanAssociates My question is a bit different, is it possible to pay yourself dividends without paying your wife dividends at the same time? E.g. if I pay myself 10k dividends does that mean my wife also has to be paid 10k dividends?
Hey, great vid! Is it worth taking on a Ltd company if it's a requirement for freelance work (no guaranteed work available) if your regular PAYE job income is part time - income of perhaps 17k? I was confused about the tax above the 12.5k allowance threshold and the dividens / tax allowances. Thanks!
That’s actually a really tough one! So much depends on what you end up doing in the freelance income, and what money you took out of the company. It’s in the realms of ‘maybe not worth it, but could be if you had a good year’
There are probably too many issues to cover in a comment on this, the answer is both yes and no depending on the situation, but I think most of the time the question is more why would you want to do this? For tax efficiency often you'd want income through the LTD
Hi there, Hope you are doing well. You made this beautiful vedio with great contents. I am planning to set up a private limited company here in UK. I would like to ask you if it is possible to put my spouse as a company secretary and also in the payroll from UK private Ltd company perspective. Best Regards, Syed
Indeed. You’d still pay Corp tax on your profits, but not the ‘secondary’ tax Dan mentioned. Although as Dan said you’d need to consider not loosing out on some allowances.
Thanks so much. I would love to know if you need to have a business bank account and business pay pal account? I'm full time employed and looking to start a side business on UA-cam and wondered for payments from google ad sense etc what was the best set up.
These videos have really helps me make decision for my small start up company starting very soon!... answering a lot of questions other videos just don't cover. Thank you!
Glad they’ve helped Thomas!
Thank you. This is exactly my situation and you've answered so many question I had for months in just a few minutes.
Glad it helped!
Wow! thank you so much. That was so clear. New Subscriber here.
Glad it helped!
This is absolutely bang on the situation I’m in. Similar job salary and looking to earn about what you said in the ltd company a year. Couldn’t have matched a better video, nice one 😂
Glad it helped Lewis!
Since this video was created, there is now a wide range of accounting software for free like Freeagent, so the accounting costs for limited companies are minimised. What are some of the allowances available to directors that have a full-time job, too? Is it £2k dividend allowance per shareholder?
Rather than allowances the target area is more likely what can the company tax efficiently pay for.
£2k allowance (soon to be £1000 then £500) is per individual for all dividends.
Brilliant, I have googled whether or not I need to go Ltd, this nails it. Thank you so much
Glad it helped Shaun
Interesting video - I suppose one way around the tax thing if you’re working as a sole trader, for example maybe doing some side hustles, would be to increase your workplace pension contributions. By increasing your pension contributions with salary sacrifice, this would bring down your gross salary and tax on your main job, and so should reduce the amount of tax you pay on your side hustle…….you get to keep more of your money, and help secure you future at the same time.
If you valued the money going into a pension you can’t touch for many years, and the salary sacrifice was legitimate then the logic as an idea is worth consideration.
At minute 4:36 you mentioned that this scenario is an entire video of its self, I was wondering if you could possibly make this video. Also explaining the best way to use profits within the business if you don't necessarily need to withdraw due to having a PAYE job already.
Will see what we can do :- )
Great video! you've given me some extra knowledge. Do you have a video that covers a scenario where someone is in full-time employment (higher tax), wants a limited company for rental properties.? I'd like info on how to manage tax, dividend and profits of such business.
We don’t currently have any videos on property tax, it’s not currently on the list to cover, although Dan hasn’t written the idea off (as he’s a property company owner himself).
I am 23 and you inspired me. Thanks
Glad to hear it!
This helped a lot, I’m looking to start a side hustle but was unsure what the best way was as earning 55k in my job. I’m going to look through the rest of your vids 👍🏻
Glad it helped Liam!
Hi Dan and team, many thanks for this and other videos. I'm keen to avoid any surprises and you have created an incredibly valuable resource.
I do have one question remaining: as sole director in my limited company I will also be employed elsewhere - and that job uses all of my allowance. I therefore intend to pay myself entirely in dividends when possible and not draw any salary. I have received conflicting advice on whether being employed elsewhere means I need to register for PAYE in my limited company.
What do I need to do in my limited company to make sure I am doing everything right? Do I need to register for PAYE or do I just keep a log of... erm... not paying myself? I do not want to pay an accountant or for software to run payroll if not necessary.
While we can't give you an opinion here on whether you are doing everything right, we can say you only need a PAYE scheme in a LTD if you are paying salaries (and there are some caveats there as well).
So if you are the only employee and not paying yourself a payrolled salary from the company, you shouldn't need a scheme (you'd just end up reporting ;NIL; each month!)
Thanks, that was really helpful.
Glad you found it useful!
Thank you for this, and your other videos. They are very helpful.
----
My income is around 70k FT/PAYE, trying to transition away and grow the company to be my only source of income.
Why would paying yourself a director's salary be a bad idea? At least up to the first tax bracket?* ah you addressed it and I jumped the gun.
What if you have a job but also making profit through your LTD? Might be using my income to fund start up costs, etc. Would be deductable from my corporation tax?
Doing all my book keeping/records with Xero.
Good to hear that I should expect about 1k for an accountant to look over it (and that's another deductible). Trying to be as thorough as I can but my business isn't an accountancy :)
Hi Thomas, glad they are useful!
The funds you introduce aren't specifically deductible against your corporation tax, but what you spend said funds on might be.
There might be a reason to pay salary regardless of the tax position, but if you've used your tax free allowance in your job you should investigate the other options, as often paying salary won't result in the best tax result (not always - very dependant on situation and goals).
@@HeelanAssociates thanks for the clear and concise answer. Yes, the money is being put in and spent.
I'll have to look into depreciation on assets more.
Thank you great content
Glad you enjoy!
Great video, but I guess I kept waiting till the end to find out the tax comparatives for trading as a sole trader vs. Ltd. Company!
Which is more tax efficient?
Any thoughts or done work on this?
We are actually going to re do the popular ‘should I be a limited company’ and look to include some examples.
Based on what you mentioned, say I start off with a sole trader then want to transition to an LLC once the business has been doing well. Do you have a video on how this process works?
This gives some thoughts SOLE TRADER TO LIMITED COMPANY - KEY THINGS TO THINK ABOUT
ua-cam.com/video/FFE9RFxrnjY/v-deo.html
Great, informative content, Thanks!
Glad you found it useful!
Can a tier 2 skilled worker visa holder run a limited company in the UK?
Hey thanks for watching. Sadly we don’t advise on visa issues so unsure on that one.
Thanks
Very insightful
Glad it was useful!
Thank you for this. Can you offset taxes from employment profit to sole-trade losses? :)
In some cases yes it’s possible.
Do you need to notify your employer if you get a limited company on the side? Or will they be notified by HMRC? Am I obliged to tell the employer?
HMRC don't tell them, even if you got a new tax code it won't say why. Whether you need to tell them is a more a question of morally and what's in your contract!
Very informative - I’m curious. If the company has more the one share holder can they all draw down the £2000 dividend tax free ?
In theory yes, the dividend allowance (now £1000 at time of writing) is personal tax related, so per person.
Thanks for the insightful video. Quick question, what if someone set-up an LTD made up of 2 directors both owning 50% of the business and they decide to take money out of the LTD after profits using dividends? will each director have a seperate dividend tax allowance ? For example one director takes out 30k and pays 8.75% dividend tax after the 500£ free allowance, the other director/shareholder also does the same. Will they both incur in 8.75% dividend tax if they take out 30k for example? or would it count as a 60k payout meaning that a higher treshold applies (33.75% for anything after 37,200) ?
Each shareholder receiving the dividend is taxed on their share only. How much tax they pay depends on their own situation.
For example it’s possible one has other income and the other doesn’t, so one could pay lower tax on their dividends than the other.
Thank you for sharing , I have a question how to account if I have started last feb 2021 for my healthcare limited . I' have rang HMRC and they said I need to file a Self -Assessment before this tax year ends , will my cut off for my self assessment be until March , although ,have not yet file the accounts I have 21 months to file the accounts . Would be the coverage of my self assessment as director via dividend and salary start of books from April 6 2021 until this march 2022 . I have also income from employemnt (PAYE) from different agency . is that correct . Thank you.
That sounds like HMRC might be talking about your personal tax return, not the company's, but its hard to be sure from the info given.
Tax years are 6th April - 5th April, with a tax return usually due 31/1 after the tax year end. So if you had a self assessment to do for 5th April 2021, would already be passed due (31/1/22).
The company tax return is due (usually) 12 months after the company year end, although the company accounts are usually due 9 months ish after year end (usually), so you tend to do the two together.
Its a bit too challenging to cover all combos here in a comment, but if you needed a direct consult get in touch with our team who could certainly help with this.
SO HELPFUL thank you. Are you taking on new clients?
Hi James,
Yes we have intakes all year round, you can get in touch with the team here:
info@heelanassociates.co.uk
02392 240040
@@HeelanAssociates thank you I dropped a message earlier
@@HeelanAssociates thank you sent a message today
With the director's salary, do you think it's a good idea to start the PAYE scheme right away even though you don't have to physically deduct the amount right away? I'm wondering if this would be a good thing for anyone that's starting out or start with the PAYE scheme on year 2 after the submission of taxes.
This one might answer that ua-cam.com/video/TkMkqUweZo8/v-deo.html
Inagine I formed a limited company with me as sole director and shareholder in order to purchase one Kilo Gold Bullion bars. The bars were owned by the company and the company then leased the Gold Bars to myself for a ten year period. If during the period of my lease the Gold Bars were insured in my own name for theft and I received a cash settlement from the insurer, would I have to pay this money back to the company.
We have so many questions here, it's too difficult to answer in a comment sadly!
Let’s say a significant other earns a salary from the company, are salaries taken before corporation tax unlike dividends?
Yes salaries paid are an expense, so *usually* reduce profit/are corp tax deductible.
Great intro video, thank you! I've just created an Ltd for a side income of £85k, on top of my £65k PAYE from my main job. So would that mean that the best way would be to make pension contributions as high as possible, followed by dividends only (i.e. no salary)?
That’s a difficult question to answer in a comment as there would be a lot more info needed to answer, however what you describe is one common strategy.
If you are employed and start a new business with no income in the first year... can you claim expenses/ tax deduct from first job for expenses of the new business?
With a limited company it’s not really possible. If you are employed, and make a loss as a *sole trader* you may be able to offset the loss against you job income and get a tax repayment.
Hello, fantastic videos! - I have a question/scenario
Say if..
My Employee income (9 to 5 job) is 55k
My own LTD income is 55k
My employee income is taxed at a mix of 0, 20 and 40% rates as income tax
But what is the most efficient way to pay out the 55k from my LTD, would I pay 7.5% tax using dividends up to the 50k ish mark or do I need to pay the 32.5% rate for dividend income straight away because of my employee job being over 50k ish?
(I’m taking the tax rates from memory here, may be wrong for the current year :) )
Many thanks for your content, great stuff
You’d pay the higher rate (33.75% as I type this) on dividends as they get stacked on top of your employed income.
How to pull out the company best depends on multiple factors so hard to say I’m afraid - there isn’t a one size fits all answer to that one.
@@HeelanAssociates Thanks for clarifying! in the pool of methods I could use to pay fewer tax, does any method really allow me to have significant tax benefits (in terms of %)?
For example the benefit of using dividends above is I assume I will pay 33.75% div tax instead of declaring it as income tax in which I pay 40% - that seems to me like the largest benefit. I would not use income tax for any reason in my scenario?
(my assumptions are, no significant other, no child etc)
Hi I have a Ltd company and earn £83k. I am considering accepting a role also PAYE at a local school. Just wondering what the tax implications of this would be? Thank you. Your videos are great!
It would be similar to this: www.heelanassociates.co.uk/more-than-one-income-stream-how-the-tax-works/
You take any earnings (dividends salary) from company and combine with paye income on tax return
Thank you so much!
I sent you an email regarding the same thing 🥳
Glad you enjoyed!
Thank you this video is very informative. But I'm stuck on couple of things
1. Everywhere I check online it says that as a ltd company and ltd director you MUST pay corporation tax, income tax and national insurance. So lets say you pay your corporation tax on the company earnings and now you're looking to take money out for personal use only through dividends. Does that mean you're breaking the law because you only pay income tax in this scenario and no NI? 🤔
2. And what is a dividend really? Like say if I were to withdraw money from my business account for personal use every month or so and by the end of the finacial year can I just let my accountant know that these withdrawals were basically dividends and then he can work out income tax on it, and this is sound from a legal perspective?
So on 1, unsure where you reading this, as its entirely possible you could pay none of those taxes, for example if the business made no money, there would be no tax to pay anywhere. There is at least a handful on scenarios I can think of off top of head where this is both legal and correct by just utilising various normal allowances.
On 2, this may help ua-cam.com/play/PLkzy-8ym2nIjDS2xB0yxZYTOfz7_PE0HK.html&si=apx6GsNDdqgyi2jV
Technically in order for a dividend to be legal there is a process (see these vids)
@ okay this is clearing up a lot for me. Many thanks
I am a ltd company and pay myself the £12500 allowance, split monthly. I am also a qualified teacher and may be going on a zero hours contract with a school to pick up some supply days. They will pay me and deduct tax and ni a source. How does this affect what i’m currently paying myself as I am obvs not paying employee tax and ni. I need the extra work but not sure if the paperwork is going to be too much
Or do I make aware to the school that they would be my second paye job and they will add a different code so I pay tax on every pound earned meaning I have no extra work to complete as a ltd company and employee of that myself?
It’s worth thinking about whether it’s actually worth it from a tax point of view to declare salary in the LTD company in this instance. There are a few factors to consider that are personal to your situation.
If it is, then one of the payrolls(yours or the school) should have a tax code applied to your pay to deduct some tax before you get it. Still might not be perfect so might need a tax return to asses, or HMRC may write to you after tax year end asking for money and or adjusting your tax code.
If my annual salary is £42,000 and my LTD company makes £10,000 profit in the first year, would I get taxed just the 19% corporation tax on the profits from the LTD company, or would I have to pay 20% tax on the first £8,270 and 40% tax on the remaining £1730? Is my income from my employer and the profits from the LTD company taxed separately, or am I taxed as an individual? Thanks very much
Hi, some comments:
*The company and you are taxed separately. The company pays corporation tax, you pay income tax.
*Your total income in a tax year personally is bundled together and sorted out in a tax return. The amount that will be taxed for example could be your job income (you may have already covered the tax via what is deducted each month), and then any salary or dividends from the company.
*This may help
www.heelanassociates.co.uk/more-than-one-income-stream-how-the-tax-works/
Hey, im not sure i understood exactly. In in my emoloyment i earn 65K is it better or worse to have a limited company and pay myself a salary?
Its so dependant on other factors there isn't a one straight answer any more. Its not a case of 'in all scenarios this is better'.
Goals such as whether you want to contribute to a pension, what you want to do with the profits etc all play a part.
Thanks for this, I just set up as a LTD company and this video along with your sole trader video helped me make my mind up that I made a mistake and should trade as a sole trader! I do have a question though, as a sole trader can I offset my expenses against the tax I pay on my wage from my job? The reason I ask is Covid trashed the business I was just about to set up so ive found something new to do with the aim of learning the ropes of running my own business to give me a head start for when I can proceed with my original idea . Ive invested quite a bit of money into buying equipment but I'm going to have to learn how to use it all before I have a product to sell, then the profit margin will only be small so Its almost certain tax I pay on my business earnings in this tax year wont be enough to offset the VAT ive paid on the equipment ive bought. Thanks.
We can't give full advice in the comments here, but to say that if you had a sole trader tax loss, it is often possible to set this loss off against your employed job and potentially obtain a tax refund. Much depends on your exact circumstances, but its certainly a possibility.
Anyone knows how will that affect the tax rate for the day job? Will the tax code change (and employer be notified?)
A lot depends if/how you are taking money out. The answer could be (for example) that it actually won’t affect it.
It would only really affect it if HMRC changed your tax code as a result of something you submittted.
@@HeelanAssociates Thank you kindly!
You can always rely on tax being around every corner.
Of course. Death and taxes right?
Hi, thanks for this advise. Just want to asks a quick question, I'm a full time health care professional wanting to provide aesthetic threatments as a side business. I will be insured to do so, would it still be advisable to become a Ltd company in case anything goes wrong, or is the insurance sufficient protection?
I think many people form ltd companies to just add that extra level of protection in case the insurance doesn't pay out (or enough!). We've had (and have) clients in your situation that are both ltd and not with varying levels of concern about the risk.
If you have another job you might find it's more efficient to be a ltd company anyway from a tax point of view, depending what you are earning.
Great video; I just started an LTD company and have filled out the contact form on your website, hoping to work together.
Appreciate you taking the time to reach out!
Can the company I work for see that I have a LTD Company linked to my name?
If you are a director yes if they search. If you are shareholder more likely they’d need to know the company name. WHAT CAN YOU SEE ONLINE ABOUT A BUSINESS’ FINANCES?
ua-cam.com/video/D6uU2_v73qI/v-deo.html
Thanks for this, just about to start a business on the side to my employment. Considering putting my wife as a director, can we both take £2k tax free dividends, or do we share the £2k between us?
£2k allowance is per person so husband/wife combo is a common strat, depending on the exact situation.
@@HeelanAssociates My question is a bit different, is it possible to pay yourself dividends without paying your wife dividends at the same time? E.g. if I pay myself 10k dividends does that mean my wife also has to be paid 10k dividends?
Hey, great vid! Is it worth taking on a Ltd company if it's a requirement for freelance work (no guaranteed work available) if your regular PAYE job income is part time - income of perhaps 17k? I was confused about the tax above the 12.5k allowance threshold and the dividens / tax allowances. Thanks!
That’s actually a really tough one! So much depends on what you end up doing in the freelance income, and what money you took out of the company.
It’s in the realms of ‘maybe not worth it, but could be if you had a good year’
@@HeelanAssociates Thanks! What a confusing world...
Can I own the Ltd company and be self employed working for that said Ltd company
There are probably too many issues to cover in a comment on this, the answer is both yes and no depending on the situation, but I think most of the time the question is more why would you want to do this?
For tax efficiency often you'd want income through the LTD
can be self employed and have a Ltd?
Yup! Nothing prevents it as is not unusual for some owners to have multiple streams on the go, some ltd some not.
Hi there,
Hope you are doing well. You made this beautiful vedio with great contents. I am planning to set up a private limited company here in UK. I would like to ask you if it is possible to put my spouse as a company secretary and also in the payroll from UK private Ltd company perspective.
Best Regards,
Syed
It's probably too long to answer here/more detail needed, but it is certainly common place to have a spouse as a co sec and/or on a payroll.
Couldnt you just not pay yourself for the first year or so while you build your business?
Indeed. You’d still pay Corp tax on your profits, but not the ‘secondary’ tax Dan mentioned. Although as Dan said you’d need to consider not loosing out on some allowances.
Thanks so much. I would love to know if you need to have a business bank account and business pay pal account? I'm full time employed and looking to start a side business on UA-cam and wondered for payments from google ad sense etc what was the best set up.
Point 6 here should help www.heelanassociates.co.uk/setting-up-self-employed-or-sole-trader/
Do I have to do a tax return the first year of opening my LTD company?
For the company, yes unless HMRC say you don't. Accounts at Companies House - certainly. Tax Return for you personally, depends on your situation.
Hi I had a few questions on this is it okay to send you an email
Hi Nick, if you contact our team on info @ heelanassociates. Co . Uk one of them can see how we might help.
Pure waffle
Did you have a specific question you’d like covered?