Paying yourself from a limited company

[chrisk999]

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Hi there,

Just wondering how those of you who set up a limited company actually pay yourselves? (especially after dividends will no longer be a useful method after April 2004)

Are you registered on PAYE, or do you just invoice the company to your self-employed business?

I'd be very grateful to hear any of your most 'tax efficient' methods before spending a waddd asking the accountant

Cheers,

Chris

[ianm]

Dividends are preferable to taking PAYE as you can have the company owned 50/50 by yourself and spouse/partner and you are both taxed separately.

Don't think the IR would be too pleased with someone taking money from a Ltd co by billing them as self-employed. You could end up being fully taxed if they decide that the company serves no real purpose.

You should be able to get a free initial consultation from most accountants.

[Matthew Wood]

I thought Mr Brown was closing this loophole ianm?

Personally pay myself a nominal £1,000 a month PAYE and rest as dividends...

Accountants are clever folks though.. depending on your volume, it makes sense to get a creative one over one providing a basic bookeeping service.

[justnozy]

Ltd Comp. Charity, Trust Fund, Sole Proprietor etc are only vehicles. Profit is taxable regardless of the vehicle. But each of the above offer different approaches to paying/saving tax.

With regard to Ltd companies the first point & why they where originally designed is to limit the personal liabilty of the individuals involved. This advantage in modern times is not always as protective as it was originally designed to be. But from an affiliate's point of veiw, you need to ask what your liabilities maybe in the event of a major problem - you may get away with not paying BT for 2/3 mths of broadband - but VAT, Tax, & NIC are different.

Sometimes Ltd. offers prestige, sometimes it makes suppliers/creditors wary.

Your accountant fees will double. Your paperwork will increase. But yes you can save tax ( see a professional accountant - not a book-keeper ).

If you are VAT reg ( if your not why be Ltd ) you will need to de-register & register ( can sell business as ongoing concern ) you will need to change bank accounts, and possibily re-establish credit rating.

Re;- I thought Mr Brown was closing this loophole ianm?

It would be difficult for Mr Brown to interfer if Husband is Ltd Comp No.1 "web-designer, affiliate rackateer (oops Marketer), etc " & wife was Comp No.2 "web conmsultant - specialising in typography & killer punchlines" especially if her "work" can be accredited to other non-associated web sites.
Besides ( been 25yrs+ since I pratised ) but there has always been an option of seperate taxation, + how are they going to police it if you are not blatant?

Final point - there are other ways of saving tax apart from dividends ( see a proffessional ).

Self Employed or Ltd ? - depends on your individual circumstances - see a proffessional.

[ianm]

Matt,

There is talk of the next buget placing some form of taxation on dividends - there is a push for the Chancellor to consult small business groups about IR591 (the proposed changes) - which you can find out about here http://www.shout99.com/contractors/s...pl?id=22264&n=

Probably worded what I said badly. What I meant was it's better to take dividends and a reasonable salary rather than take everything out of the company through a salary. We do similar to you with me taking out a reasonable salary and then top up with dividends to both of us.

I think those that will be most effected by any taxation changes are the ones that take a salary that is well below the market rate for the work that they do and then take large dividends - so that the wife/husband who does nothing gets a large payment.