Comments on: What is the most tax efficient way to be paid from my company? http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/ Blog for business owners and people about to go into business Thu, 12 Aug 2010 05:51:37 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Susan http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-1729 Susan Mon, 09 Nov 2009 22:18:54 +0000 http://www.in-business.org.uk/?p=470#comment-1729 Hi. re Simon's query above, and your reply "If the whole of the £18,000 is a loan then this amount can be withdrawn tax free without having to pay PAYE (Income tax or National Insurance)". I am in the same situation, invested money in the business to start with and have been repaying that back to myself since. In that time I have paid no NI or PAYE. Two questions: 1. As I have not paid NI in the time, do I have a black home in my contributions, or is it covered given the loan repaying scenario I am in, and 2. How should I start remunerating myself now, given the loan is almost repaid? Should I draw a basic salary and thereby have my NI etc paid via the company? I don't want to leave myself in a situation where I do not qualify for state benefits having been in the system for 10 yrs before setting up my business! Thank you. Hi. re Simon’s query above, and your reply “If the whole of the £18,000 is a loan then this amount can be withdrawn tax free without having to pay PAYE (Income tax or National Insurance)”.

I am in the same situation, invested money in the business to start with and have been repaying that back to myself since. In that time I have paid no NI or PAYE.

Two questions: 1. As I have not paid NI in the time, do I have a black home in my contributions, or is it covered given the loan repaying scenario I am in, and 2. How should I start remunerating myself now, given the loan is almost repaid? Should I draw a basic salary and thereby have my NI etc paid via the company? I don’t want to leave myself in a situation where I do not qualify for state benefits having been in the system for 10 yrs before setting up my business! Thank you.

]]> By: Adrian http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-1531 Adrian Wed, 23 Sep 2009 11:06:35 +0000 http://www.in-business.org.uk/?p=470#comment-1531 My client is a limited company onwed outright by a hisband & wife team. For some years they have employed another family member who has been a significant contributor to the sales growth of the business in that time. If the business is to be sold in, say, 3 years time, what would be the most tax efficient way of the other family member being duly rewarded for their effort and contribution in growing the value of the business (at present they do not own any shares of any kind in the business)? My client is a limited company onwed outright by a hisband & wife team.
For some years they have employed another family member who has been a significant contributor to the sales growth of the business in that time.
If the business is to be sold in, say, 3 years time, what would be the most tax efficient way of the other family member being duly rewarded for their effort and contribution in growing the value of the business (at present they do not own any shares of any kind in the business)?

]]> By: admin http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-1347 admin Wed, 26 Aug 2009 23:27:59 +0000 http://www.in-business.org.uk/?p=470#comment-1347 I am not sure how you are trading, but on the assumtion you are using a limited company, then this is correct so long as the £18,000 has been paid in to the business on the basis of a loan. If the whole of the £18,000 is a loan then this amount can be withdrawn tax free without having to pay PAYE (Income tax or National Insurance). However, if the business makes a profit in the same period over which the loan is repaid, the company will pay Corporation Tax on the profits made in that period at the rate applicable to the level of profits made. I hope this makes sense and answers your question - if you have any further questions by all means ask and I will help where I can. I am not sure how you are trading, but on the assumtion you are using a limited company, then this is correct so long as the £18,000 has been paid in to the business on the basis of a loan. If the whole of the £18,000 is a loan then this amount can be withdrawn tax free without having to pay PAYE (Income tax or National Insurance). However, if the business makes a profit in the same period over which the loan is repaid, the company will pay Corporation Tax on the profits made in that period at the rate applicable to the level of profits made. I hope this makes sense and answers your question – if you have any further questions by all means ask and I will help where I can.

]]> By: Simon http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-1345 Simon Wed, 26 Aug 2009 14:42:57 +0000 http://www.in-business.org.uk/?p=470#comment-1345 Is my accountant right- I have invested £18000 of my own savings into my business and the bank account and until I have drawn down this complete amount I do not need to pay any tax or national insurance until I have taken back my initial investment? Please help anyone as I don't want to be stung with a massive tax bill if this is wrong. Is my accountant right- I have invested £18000 of my own savings into my business and the bank account and until I have drawn down this complete amount I do not need to pay any tax or national insurance until I have taken back my initial investment? Please help anyone as I don’t want to be stung with a massive tax bill if this is wrong.

]]> By: Nur http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-994 Nur Wed, 15 Jul 2009 17:20:40 +0000 http://www.in-business.org.uk/?p=470#comment-994 I'm surprised that no insurance guys have ringed in on this subject. It may be because the laws are different in Canada than the UK but I don't beleive that is the case. I am talking about if your corporation has retained earnings that are staying in the corporate account for tax reasons. A business owner (or owners) could use some of that cash purachase a Life insurance policy on themselves, and have the business as the owner beneficiary. Upon death of the life insured, the funds go into an account of which a large amount can be paid out tax free the subsequent business owners (likely the insured's family). I’m surprised that no insurance guys have ringed in on this subject. It may be because the laws are different in Canada than the UK but I don’t beleive that is the case. I am talking about if your corporation has retained earnings that are staying in the corporate account for tax reasons. A business owner (or owners) could use some of that cash purachase a Life insurance policy on themselves, and have the business as the owner beneficiary. Upon death of the life insured, the funds go into an account of which a large amount can be paid out tax free the subsequent business owners (likely the insured’s family).

]]> By: Josh http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-976 Josh Tue, 14 Jul 2009 14:15:12 +0000 http://www.in-business.org.uk/?p=470#comment-976 I'm so glad I left the UK for the Isle of Man. The tax laws are so simple to follow. No corporation tax. Pay 10% of everything you make over 9K and 18% if you are a top earner. Of course, you spend a fortune getting on and off the rock but its worth it :-) I’m so glad I left the UK for the Isle of Man. The tax laws are so simple to follow.

No corporation tax.
Pay 10% of everything you make over 9K and 18% if you are a top earner.

Of course, you spend a fortune getting on and off the rock but its worth it :-)

]]> By: almir http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-968 almir Tue, 14 Jul 2009 05:24:32 +0000 http://www.in-business.org.uk/?p=470#comment-968 Taxes can always be planned but need some basic knowledge of how the taxation works. I think salary and perks are the most common of them all. Almost all company owners do that. .-= almir´s last blog ..<a href="http://doctorsmedicalbilling.com/medical-billing-training/" rel="nofollow">Medical billing training</a> =-. Taxes can always be planned but need some basic knowledge of how the taxation works. I think salary and perks are the most common of them all. Almost all company owners do that.
.-= almir´s last blog ..Medical billing training =-.

]]> By: Types of businesses and setting up in business | in business blog for successful entrepreneurs http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-425 Types of businesses and setting up in business | in business blog for successful entrepreneurs Fri, 10 Apr 2009 20:00:56 +0000 http://www.in-business.org.uk/?p=470#comment-425 [...] are only four ways to take money out of a limited company and each way has its own tax implications. Please note that, as a company director, you will have [...] [...] are only four ways to take money out of a limited company and each way has its own tax implications. Please note that, as a company director, you will have [...]

]]> By: admin http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-414 admin Wed, 08 Apr 2009 18:10:53 +0000 http://www.in-business.org.uk/?p=470#comment-414 Yes you can take the profits as dividend, but make sure the amount you take is from "distributable profits" and that the profits are declared in the right way according to the Articles of Association for the company. Also, make sure that the company is not subject to the IR35 rules, in which case HMRC will deem a salary paid and employers NI on this where no salary has been drawn. The other consideration for your friend is in terms of pensions both personal and state, as it is worth paying at least a minimal salary so that some National Insurance is paid so that his state pension is contributed to and where he has a salary he will then be able to contribute to a personal pension - for this he will need to seek the advice of an Independent financial adviser (IFA). Hope this helps. Yes you can take the profits as dividend, but make sure the amount you take is from “distributable profits” and that the profits are declared in the right way according to the Articles of Association for the company.

Also, make sure that the company is not subject to the IR35 rules, in which case HMRC will deem a salary paid and employers NI on this where no salary has been drawn.

The other consideration for your friend is in terms of pensions both personal and state, as it is worth paying at least a minimal salary so that some National Insurance is paid so that his state pension is contributed to and where he has a salary he will then be able to contribute to a personal pension – for this he will need to seek the advice of an Independent financial adviser (IFA). Hope this helps.

]]> By: Gareth Ferguson http://www.in-business.org.uk/what-is-the-most-tax-efficient-way-to-be-paid-from-my-company/comment-page-1/#comment-413 Gareth Ferguson Wed, 08 Apr 2009 16:33:02 +0000 http://www.in-business.org.uk/?p=470#comment-413 Dear writer, I have been asked by my friend who has their own limited company (they are the only employee), as a qualified accountant, what i believe the most tax efficient method to receive earnings from their company would be. I searched through the web and found your article to be quite informative, yet it seems too good to be true that as an employee of the company he can take a 'dividend' for any amount and have only the company pay coporation tax on profits (with this amount added back as a disallowable deduction). Surely there must be limits placed (by HMRC)for such divident payment scenarios?? Thanks in anticipation. Dear writer,

I have been asked by my friend who has their own limited company (they are the only employee), as a qualified accountant, what i believe the most tax efficient method to receive earnings from their company would be.
I searched through the web and found your article to be quite informative, yet it seems too good to be true that as an employee of the company he can take a ‘dividend’ for any amount and have only the company pay coporation tax on profits (with this amount added back as a disallowable deduction). Surely there must be limits placed (by HMRC)for such divident payment scenarios??

Thanks in anticipation.

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