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  • Tax

    Questions relating to Limited Co...

    With a LTd Co route, you control the tax  somewhat, ie. do I pay Corproation Tax 19% and dividend tax 32% or do I leave the money in Ltd Co and pay just Corporation Tax 19%.  ie. The company route is good for growing the business portfolio, because the business is less tax, only 19% (soon to be 17% tax) where as if the portfolio were in your name as the individual the tax paid would be much more.

    Another point not yet considered, I note from your name that you maybe from Holland, if you are or become a non uk tax resident, then you do not pay dividend tax to the UK when you waive your right to your UK tax-free allowance your dividend income will be regard as "dis-regarded income" by the UK HMRC.  Instead you will be liable to pay dividend tax to whichever tax jurisdiction you are resident, which may have a lower rate of dividend tax than the UK (32%).

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    Thanks Arran, one of my concerns with using a limited co is that the government changes the policies at some point so that landlords end up paying far more tax. Far more people appear to be using limited companies since the changes on tax relief. I guess there will always be that uncertainty.

    You are quite right, the name is South African so Dutch in origin. Just about to become a British citizen though so all taxes are paid here. I did look into investing abroad at one stage but for now, I think I will stick to what I know.

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    If Labour win the next GE which is most likely Corporation Tax will be returned to far higher levels of 26%.

    So toss a coin and decide whether you bank on Labour NOT becoming the next Govt.

    If they do and you have incorporated you will be stuffed!!

    Perhaps S24 tax will be less err!! Taxing!!!


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    Given that Labour were unable to win despite the terrible campaign the conservatives had, and that the conservatives are unlikely to repeat their mistakes next time I don't think it is very likely that Labour will win.

    Even if they did, putting corporation tax above income tax would just encourage incorporated LLs to pay themselves a salary..

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    I'm a British Citizen and am non UK tax resident living in Thailand, however my business is UK based with several UK Ltd Cos.

    The business pays corporation tax on profits from its income @ 19% in 2018 to HMRC.

    However me as an individual does not pay tax on my dividends to HMRC.  As a non UK tax resident my dividends are classified as "dis-regarded" income by HMRC, I am liable to pay tax on my dividends to my tax jurisdiction which is Thailand which not the same rates as the UK.

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    Hey Gerhard.

    The advice above is not all correct:

    1) you CANNOT pay a dividend to a director as such; dividends can only be paid to shareholders. Of course, directors can also be shareholders but they don't have to be (and vice versa).

    2) directors are NOT employees (though they can be); the duty to act in the company's best interest comes from being a director (not being an employee).

    3) the Co CAN deduct interest payable by it to you in respect of the director's loan from profit and so save tax of 20% x the interest payment.  As an individual, (I think) you can get up to £1000 per year tax free.

    The Co cannot deduct the principal repayment from tax (so any repayment is from after-tax money)

    4) you don't pay tax twice: Say the Co has a rental profit of £10,000 in 2019.  It will then pay corporation tax of £2,000 (20%). This leaves £8,000 in the company after corporation tax. 

    If you then take a dividend, the first £2,000 (for each shareholder) is tax free. This leaves £6k.  Assuming you're a higher rate taxpayer before taking any dividends, the dividends will be taxed at 32.5%. So, 32.5% x 6000 = £1,950.

    So total tax paid on £10k of rental profits in a Ltd Co = £2k (corp tax) + £1,950 (divi tax) = £3,950 (effective total tax rate 39.5%).  If you were a higher rate taxpayer owning the same BTL property, you would have paid 40% on the full £10k.

    Dividends are more efficient than taking a salary, because you don't pay NI on dividends but you have to on salary (above 8k).

    Hope this helps.

    ps - Geluk met die citizenship. Die rooi paspoort is beter vir reis as die groen mamba.


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    Spot On

    There can be a lot of confusion on running a company

    This is the reason why Investors need to consider is a company formation better or not due to S24

    Company formation save you from S24 but It gives you other tax liabilities

    and yes you have great responsibility as a Director The Company come first ??? no if or buts

    Investors can not just dip into the Company Currant account and take money

    The reason is its not your money to take It belongs to the Company and needs to be accounted for down to every penny


     

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    Learn Change and Adapt ?????


    can someone help with a bun pun?

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    Only if you give me a good raisin.

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    The tax free allowance for dividends is still £5,000. The reduction to £2,000 was dropped due to the election, though I expect it will be reintroduced.

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