I am soon to start a new job as an employee but I am also a director of 2 separate companies which I built up last year { it is just me running 2 websites }
I will be using HMRC basic tools and they have informed me my £12500 allowance will be based against the employed job and I will have to use the BR tax code to pay the 20% tax on profits from each of my 2 companies when I start making money.
where does the dividends come into play here?? I believe this is £2000 per year / £167 month - How does this work with regards to paying myself? example if I made £2000 in one month but had £500 business costs do I deduct the £167 from the £1500 and then pay 20% tax on the £1333
any info appreciated - hope I have explained this correctly above,
Hi Paul
You have been completely mis-informed and your numbers are not right. You do not pay 20% on company profits, nor on dividends.
Plus you are making no allocation for any accrual type and other adjustments, calculations are not purely cash based (in most circumstances)
You really need a professional Accountant/suitable tax advisor for this case, so that they can take all of your personal circumstances into account, including ensuring you can extract profits at the lower rate once you wind matters down. Mistakes at this stage, can be very costly (not least in fines/penalties for getting wrong)and restrictive tax wise for in the future. Besides, whilst you may think you cannot afford to pay a professional, you would find that by doing so you will actually save yourself in the long run.
Tax planning - the key is in the second word.
Also, just so you know, this site is actually for such financial professionals to exchange information, rather than members of the public. You cannot rely on any information given on here as it is not specific to your circumstances.
So it is/has long been the forum's stance that requests from members of the public cannot be responded to for many reasons. To provide such advice a member would need to enter into a formal engagement with you. Be very careful of getting such advice from other forums, because you do not know the knowledge base of the respondent, nor indeed whether or not they are answering your answer in full (very few drill down enough, as a personal advisor would).
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I am soon to start a new job as an employee but I am also a director of 2 separate companies which I built up last year { it is just me running 2 websites }
I will be using HMRC basic tools and they have informed me my £12500 allowance will be based against the employed job and I will have to use the BR tax code to pay the 20% tax on profits from each of my 2 companies when I start making money.
Hi Paulie
As Joanne says you definitely need some tax advice here, it'll save you a pretty penny in the long run. That info above is so wrong, BR codes have nothing to do with profits or dividends.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
thanks for reply - I will defo seek advice - sounds like this could get messy on my own,
just a question then for my own knowledge before I get help - if you can answer - lets say one of my companies gets £1500 payment but has £500 business costs = 1000 profit - would 1500 be transferred form the business account into the personal account and then £1000 dividends declared? what would the monthly tax situation be in such a scenario? is a payroll still ran?
{ sorry to sound so vague but I have never been a director before and we have just started trading }
Judging by your questions You should have sought professional advice before opening the companies, they would have advised you on how best to extract money.
Everything you are suggesting is wrong, you can not transfer £1,500 if you have already spent £500 on expenses you only have £1,000 left.
Dividends are only declared from profits after CT
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Your example is wrong regardless of the maths mistake because you haven't allowed for tax.
You could either payroll it, declare a dividend, a combination of the two or leave it in the Company for a rainy day. In all the scenario's you will have tax to pay, whether it is PAYE tax, Corporation Tax, or both. (based on the limited info you have provided)
It would depend on your specific circumstances and an accountant will advise on the best way to do extract the profit based on that. He/she could well do it one way for you and a totally different way for someone else.
When are your accounting periods and what sort of profit are you hoping to achieve? It may be you could pay over a period of months depending on how far away that is, I would certainly be happy to work that way.
Can I ask why two Ltd Companies?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
