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Sam
Sam, Accountant
Category: Tax
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Hi. I was salaried employee for most of FY14 but did some short

Resolved Question:

Hi. I was salaried employee for most of FY14 but did some short term contracting work at the end of the FY. I am seeking advice on a one off basis (i am now working for company again) regarding what to pay myself vis a vis dividends / salary and how to handle National insurance payments etc. Are you able to advise and what would it cost ?
I have all the numbers at hand.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question.
Did you set yourself up as a limited company with Companies House and HMRC for this work? Or as a sole trader (self employed)
How much were you paid?
I can then advise further
Thanks
Sam
Customer: replied 2 years ago.

limited company at companies house

Expert:  Sam replied 2 years ago.
Hi Kevin
Thanks for your response
What was the turnover and expenses - have you submitted your Companies House return and Corporation tax return yet? (What date did you start trading)
Did you pay yourself any money (which would be treated as salary)
Thanks
Sam
Customer: replied 2 years ago.

£29774 under limited company.

Expenses circa £500 for computer.

I have not submitted companies house return or corporation tax return yet.

Started trading 17 Feb 14. Contract completed 31 Mar 14.

In addition I need to factor in the following from my salaried employment:





















Gross pay135155
Gross pay for Tax Deductions105805
lump sum29350
Tax paid30022.3

I have not formally paid myself any salary through limited company.

hope that makes sense !

Kevin

Expert:  Sam replied 2 years ago.
Hi Kevin
Thanks for your response
Was the lump sum paid tax free? As this may in fact now be deemed to liable to tax as you returned to the company.
So this will need establishing.
But as you drew no salary or dividends and the monies are all sat in the limited company bank account, then there is NIL salary and dividends for 2013/2014
So you just have a straight forward self assessment tax return to fill in, with employment and the lump sum payment position.
Have you registered for HMRC free online services to submit your tax return, and do you need any further help, as the position for the question you asked, has been fully dealt with (as its NIL for both with no National Insurance to consider either)
Any payment you make to yourself before 05/04/2015 (based on what you advise) will affect this tax year 2014/2015
And whilst you can pay the salary and have this as an expense against the profits made, dividends are a little more complex, where they can only be paid after the corporation tax has been taken into account, so you need to get the Companies House tax return and Corporation tax return filed first so you can see what profits are left over, after the Corporation tax has been considered.
But for the salary you need to operate PAYE so that the right tax and National Insurance are deducted so you will need to register as an employer with HMRC.
And there is no National Insurance on Dividends, nor the need to register for an Employer with HMRC.
Thanks
Sam
Customer: replied 2 years ago.

Hi, I'd just like to clarify the response.

I was really looking for advice on what would be or have been the best mix of salary, dividends and corporation tax based on the numbers I provided.

In terms of the payments to myself by the company - the company bank account is my bank account. I have not formally made payments yet because I haven't had to move the money anywhere. Notionally I was looking to pay myself not salary but dividends and file this at the end of the company tax year (end Jan 15?).

The dividend payments are what I would then expect to include on my self assessment tax return. I was just looking for advice on whether this was the best approach based on the numbers I provided and the fact that I have c£100k tax deductible salary to take into account.

Does that make sense ?

I am already set up on self-assessment.

many thanks

Expert:  Sam replied 2 years ago.
Hi Kevin
Thanks for your response
We cannot offer that sort of service without engaging you as a client, as we would need access to your accounts and personal situation, and sadly with out affiliation with Just Answer. we are not permitted to do this.
But I can advise the situation is NIL for 2013/2014 (although I am little worried that the limited company account is your own bank account, by law you have to set up a bank account in the limited companies name - is this not the case?)
But you have nothing to declare to HMRC until you have paid yourself formally, which you have not yet done.
But I can advise loosely that with a profit of £29774 on which £500 expenses (Annual Investment allowances) leaves £29224 - and Corporation tax of 20% = £5844.80 leaves 23379.20 available profit, If you paid this as dividends (gross of £23379.20 so actually take all but £2337.92 (as this is the notional 10% tax credit)- which leaves you make a payment of £21041.28
Then you will have a further 27.5% tax on the excess income over and above £150,000 and a further 22.5% on the amount up to total income of £150,000) on this payment( as the rate is 32.5% up to £150,000 and then 37.5% on income in excess of £150,000 but the company would have suffered 10% notional tax which has to remain in the company, which reduces this down to 22.5% and 27.5% ) you then on £21,041.28 will pay between £4734.22 and £5786.35
And no national Insurance.
Thanks
Sam
Customer: replied 2 years ago.

Hi Sam

I think that's clear, many thanks. I have one final clarification. Your paragraph below refers to the capital gains tax to be paid on dividend payments I am assuming ?

If that's the case then great I am clear on what I need to do.

Grateful if you could just confirm.

many thanks

Kevin

'Then you will have a further 27.5% tax on the excess income over and above £150,000 and a further 22.5% on the amount up to total income of £150,000) on this payment( as the rate is 32.5% up to £150,000 and then 37.5% on income in excess of £150,000 but the company would have suffered 10% notional tax which has to remain in the company, which reduces this down to 22.5% and 27.5% ) you then on £21,041.28 will pay between £4734.22 and £5786.35

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response Kevin
No its not capital gains tax on the dividends, its income tax.
Capital gains (but its within Corporation tax as a limited company) arises when the company if sold
Do let me know if you have any further questions. But if you would be willing to rate/accept the answers, this ensures that Just Answer credit me for my time.
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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