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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Income tax advice directors

Resolved Question:

income tax advice for company directors
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. How can I help?
Customer: replied 1 year ago.

sorry did you get my last e -mail with the details?

Expert:  TonyTax replied 1 year ago.
I'm afraid not.
Customer: replied 1 year ago.

sorry I will do it again....I am a co director of a ltd company, company was incorporated last year. From April onwards I have been advised to pay myself a salary of £8052, and tax free dividends to £7948. After that for the next £27000 I am to pay £2025 (7.5%).

What happens after the £27000 ?

I am paid a retainer by an Italian company with no presence in the UK, so I am paid a retainer of £K100/year, £8333 per month plus expenses.

I have other questions to follow

Expert:  TonyTax replied 1 year ago.
I have your question now.
Expert:  TonyTax replied 1 year ago.
In 2016/17, you will have a personal allowance of £11,000. The next £32,000 of income will be taxed at 20% subject to a different rate for dividends. In 2016/17, out of £32,000 of dividends, £5,000 will be taxed at 0% which will leave £27,000 which will be taxed at 7.5% (£2,025.00). Any further dividends will be taxed at 32.5% and dividends which take your income over £150,000 will be taxed at 37.5%. Use the calculator here to experiment. Assuming you will be an employee of the Italian company, you will have to report your retainer in a tax return. You may also be required to set up a PAYE scheme to use against your retainer. Look here for more information. If it is paid to you on a self-employed basis, you won't need to operate PAYE and will pay the tax after the tax year end. I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 1 year ago.
I have to go out for about 20 minutes but will be back to answer any follow up questions you may have.
Customer: replied 1 year ago.

the advice you give is a bit different from an hmrc advisor. The £11000 reduced to £8052 , I am the only person in the company, The £K3 now restricted to those employing 2 or more, there is only me. I am NOT an employee but a retained consultant, the Italian company do not have a UK bank account or any other business in UK. Would it be more beneficial for me to be a sole trader?. Quick q relating to dividends, so if I take £100K as a total figure, Salary of £8K, so £K92. £K5 taxed at 0%, leaving £K87. the next £K27 taxed at 7.5%, leaving £K60 taxed at 32.5%, is that right (100-(8+5+27=40)=£K60.

Expert:  TonyTax replied 1 year ago.
I gave you the tax allowance figures and taxable income, not the NIC figures. As it is, your proposed earnings will be less than the threshold at which NIC starts for employee and employer. I wouldn't change from the director route to a sole trader route for that income. You can be a sole trader as well. If your gross income is over £100,000, you will lose £1 of the personal allowance for every £2 of income over £100,000. Between £43,000 and £100,000, dividends will be taxed at 32.5%. After that, you lose part or all of your personal allowance. At £150,000, you will have no personal allowance and £118,000 of dividends will be taxed at 32.5%.
Customer: replied 1 year ago.

Great, thank you, ***** ***** quite a lot more tax than I did last financial year, so I am thinking of increasing my pension contribution, I think this would be a good move, would you agree on this?

I think I get tax relief in this, is this correct?

Really sorry if these sound really thick..

Expert:  TonyTax replied 1 year ago.
Pension contributions are a good way of extracting money from a company. The company will get tax relief at 20%. If you pay pension contributions personally, you will be restricted to getting tax relief on 100% of your earnings but you'll get tax relief at 40%. You need to be aware of the annual allowance for pension which is £40,000. Take a look here for more information and consult an independent financial adviser.
Customer: replied 1 year ago.

thank you, ***** ***** help

Expert:  TonyTax replied 1 year ago.
Thanks. Would you mind rating my answer before you leave the site.
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