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  • Tax

    Tax free dividend from new company

    Hello folks,

    I'm right at the start of my property investment journey. I haven't bought a property yet, but I have setup a company.

    I don't plan on making my first investment before April 2017, so won't be kicking things off until after this financial year has ended. However, I'm wondering if it's possible to make a Directors loan to the company of £10000, then taking a tax free dividend for myself and my wife (as Directors) of £5000 each.

    In the future, when the company has spare funds, I will pay my loan back to myself.

    Is this legit and does it make sense to do?

    I would ask an accountant, but I haven't signed up with one yet - and probably won't until the new financial year has started.

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    can I ask why are you waiting till April 2017  if your investing via a company

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    Learn Change and Adapt ?????

    I'm not intentionally waiting to make an investment, it's just April isn't far away and I'm not expecting have made a purchase before then.

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    I understand  Its just if you form a company you will pick your own tax year


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    Learn Change and Adapt ?????

    Dividends are paid from profits, so no

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    Hello Alistair,

    If you're considering setting up a company, whatever its purpose is intended to be, I'd recommend consulting an accountant BEFORE you make any decisions.  A good accountant is essential, in my opinion, to guide you in tax planning and strategy amongst other things.  But the key is to consult one before you do anything.  I'm NOT an accountant by the way ;-)

    All the best

    Helen


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    I'm with Pip - I can't see what you are seeking to achieve. You start with £10,000. You lend it to the company. The company pays it back to you  in dividends. Yes you have cleverly avoided tax. You can rinse and repeat as often as you like (although next year it will have to be £2,000 each). But you still have £10,000, yes it's tax free, but you weren't going to pay tax on it anyway! What's the point? You are just swapping who holds the £10,000 with your company.

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    Thanks for the comments everyone, and yes I will talk to an accountant.

    I was just trying to think of a way to maximise the amount of tax free dividend I can take over the years.

    Anyway, it seems like it's a bad idea, so I'll knock it on the head :-)

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