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Cardwell Management Services UK Limited
Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
Cardwell Management Services UK Limited
Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
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What do I need to know?
The taxation obligations of a limited company falls into the following categories;
1. Corporation Tax - this is effectively an income tax on Companies! A tax applied to the profits generated by the company. How much tax you need to pay is determined by the amount of profit that you make. As with personal income tax, there are bandings applied with differing tax rates - keep an eye on the HMRC website for the latest information on applicable rates
2. Employer's National Insurance Contributions (NICs) - When you pay a salary to an employee, and remember, you will be an employee of the limited company, the company has an obligation to pay an additional payment to the Revenue. This is known as Employers National Insurance Contributions (NICs) - see the HMRC website for the latest information on rates
3. VAT - depended upon your turnover, you may be forced to register for VAT. See here for further information
As a director of a Limited Company, you do have a range of options available to you to minimise your tax liabilities
Rather than taking a full salary, you may decide to pay yourself a dividend. Dividends are a proportion of post tax profits paid to the owners of a company. A limited company is owned by its shareholders. So, if you hold shares in a company, you may be entitled to receive a dividend.
The total amount of dividend you receive depends on the number of shares you hold. So, if you have 50 shares and are paying a £500 dividend per share, you will receive £25,000 but the total paid out in dividends cannot exceed the retained profits of the Company. When a company intends to pay out a dividend, it holds a directors’ meeting to declare the dividend.
Your accountant can assist you with calculating funds available for distribution and preparation of the appropriate paperwork.
In general, you should not declare a dividend more than four times a year, although dividends can be declared as frequently as the directors choose. However, HMRC may consider any regular ‘same value’ payments to be salary, e.g. a standing payment of £1,000 every month. Dividend paperwork must conform to the law otherwise HMRC can consider it as salary and as such the amounts will be subjected to PAYE. This will negate any benefit from using dividends.
Declaring a dividend is not the same as actually paying out the dividend. When the company declares a dividend, it signals an
intention to earmark a given amount of money for shareholders in its accounts. The cash can stay in the company’s business or savings account and the shareholders can then draw it out as they wish.
See Also
HMRC Compliance
Recommended Links
HMRC Employer Guides
The taxation obligations of a limited company falls into the following categories;
1. Corporation Tax - this is effectively an income tax on Companies! A tax applied to the profits generated by the company. How much tax you need to pay is determined by the amount of profit that you make. As with personal income tax, there are bandings applied with differing tax rates - keep an eye on the HMRC website for the latest information on applicable rates
2. Employer's National Insurance Contributions (NICs) - When you pay a salary to an employee, and remember, you will be an employee of the limited company, the company has an obligation to pay an additional payment to the Revenue. This is known as Employers National Insurance Contributions (NICs) - see the HMRC website for the latest information on rates
3. VAT - depended upon your turnover, you may be forced to register for VAT. See here for further information
As a director of a Limited Company, you do have a range of options available to you to minimise your tax liabilities
Rather than taking a full salary, you may decide to pay yourself a dividend. Dividends are a proportion of post tax profits paid to the owners of a company. A limited company is owned by its shareholders. So, if you hold shares in a company, you may be entitled to receive a dividend.
The total amount of dividend you receive depends on the number of shares you hold. So, if you have 50 shares and are paying a £500 dividend per share, you will receive £25,000 but the total paid out in dividends cannot exceed the retained profits of the Company. When a company intends to pay out a dividend, it holds a directors’ meeting to declare the dividend.
Your accountant can assist you with calculating funds available for distribution and preparation of the appropriate paperwork.
In general, you should not declare a dividend more than four times a year, although dividends can be declared as frequently as the directors choose. However, HMRC may consider any regular ‘same value’ payments to be salary, e.g. a standing payment of £1,000 every month. Dividend paperwork must conform to the law otherwise HMRC can consider it as salary and as such the amounts will be subjected to PAYE. This will negate any benefit from using dividends.
Declaring a dividend is not the same as actually paying out the dividend. When the company declares a dividend, it signals an
intention to earmark a given amount of money for shareholders in its accounts. The cash can stay in the company’s business or savings account and the shareholders can then draw it out as they wish.
See Also
HMRC Compliance
Recommended Links
HMRC Employer Guides