With my background being mostly audit/accounting and not tax I need help on various bits and pieces.
I have recently acquired a client who is setting up a limited company and will be using Pensions Income to help pay the bills etc and to invest some into the company.
In order to effectively set things up for him for his personal income/tax affairs, can someone tell me how the Pensions Income affects his tax affairs, especially re: personal allowance, so I can see whether he should have a salary or not from the Limited Company.
Probably not such a complicated area (unless follow up questions come) but the pension income will just be classed as taxable income and as a director he will be required to complete a tax return which will declare this income.
This will eat into his personal allowance.
Depending on his age he may be entitled to an increased age personal allowance, but this will decrease as his total income exceeds certain limits (c.£22k but please check).
Any investments into the company would generally go to his directors loan account. If the monies introduced into the company create a positive loan account your client will be able to draw down on the positive loan in the future with no tax consequences which the loan remains in a positive position. Negative loan accounts will have tax implications.
Depending on how well the company does from the offset your client should also consider a combination of dividends and salary but this is a point to consider only when the company has or expects there to be positive Profit and loss Reserves.
Just a few points and 'm sure you have specific questions, so feel free to ask.
-- Edited by adi2402 on Sunday 3rd of October 2010 06:58:13 PM
__________________
Forgive the typo's I generally do not proof read. Just lazy I guess!
