Short lived Ltd company
Discussion
I know some proper accountant advice will probably be required but can anyone advise the most cost effective way to extract the money from ltd co that’s only going to be operating for a few months?
Scenario is that my wife’s previous employer went bust late last year out of the blue so she decided to set up her own consultancy business. All started well but then being hit with lockdown the work dried up straight away.
She’s now been offered a position back in the world of paye so looks like the ltd co will go no further so question is what’s the best way to withdraw the money?
Scenario is that my wife’s previous employer went bust late last year out of the blue so she decided to set up her own consultancy business. All started well but then being hit with lockdown the work dried up straight away.
She’s now been offered a position back in the world of paye so looks like the ltd co will go no further so question is what’s the best way to withdraw the money?
depends on age and if you need/ want the cash now.
- paying out the company into a pension is prob the most effective way (depending on pension being in place/ life time allowances etc....)
- just pay it all out as paye salary, simple, saves self assessment/ potential payment on account for next year on tax (altho can request you don’t pay these to hmrc if circumstances allow- eh going back to paye role)
- pay out as dividend, lower tax bands than paye tax. however also need to allow for corporation tax paid by company
- entrepreneurs relief, depends on maybe needing to set up limited company in future
in all these scenarios you would still need to pay company expenses in the mean time- accountants fees, statutory filing etc...... speak to your accountant, they’ll advise on the best scenario depending on how much cash is sitting in the company.
- paying out the company into a pension is prob the most effective way (depending on pension being in place/ life time allowances etc....)
- just pay it all out as paye salary, simple, saves self assessment/ potential payment on account for next year on tax (altho can request you don’t pay these to hmrc if circumstances allow- eh going back to paye role)
- pay out as dividend, lower tax bands than paye tax. however also need to allow for corporation tax paid by company
- entrepreneurs relief, depends on maybe needing to set up limited company in future
in all these scenarios you would still need to pay company expenses in the mean time- accountants fees, statutory filing etc...... speak to your accountant, they’ll advise on the best scenario depending on how much cash is sitting in the company.
Thanks for the replies.
She was a higher rate tax payer with the previous employer.
The new position is strange as she’s starting off in a temporary role which pays through an umbrella company but she has been guaranteed the permanent role which will be regular paye.
Think she’s looking just to take the money out it’s about 18k
Edit she is 50yo
She was a higher rate tax payer with the previous employer.
The new position is strange as she’s starting off in a temporary role which pays through an umbrella company but she has been guaranteed the permanent role which will be regular paye.
Think she’s looking just to take the money out it’s about 18k
Edit she is 50yo
Simpo Two said:
If she can make £18K in a few months from a standing start maybe she should stay out of PAYE and stay on the open plains of opportunity.
She done great to get going so quickly but Covid pulled the rug clean away. She not liking the uncertainty that goes with setting up yourself and the new role is perfect Job in her eyes a start up that’s public sector backed.Does she have an accountant?
If not she's going to need to get one more likely than not.
Has she paid all taxes due, returns up to date and what is left is net profit?
Putting it into a pension will be most tax efficient (and also possibly present a CT rebate), otherwise as it's under £25k there is no need for a formal liquidation.
If not she's going to need to get one more likely than not.
Has she paid all taxes due, returns up to date and what is left is net profit?
Putting it into a pension will be most tax efficient (and also possibly present a CT rebate), otherwise as it's under £25k there is no need for a formal liquidation.
She’s had a couple of initial conversations with accountants just to get an idea of fees.
This job has come around quick the business has only really been going 4-5 months, she really looking to take the majority out as a salary/dividend? as she has used some savings before the money got paid.
Best she just sorta out an accountant to advise the best way to pull it out.
This job has come around quick the business has only really been going 4-5 months, she really looking to take the majority out as a salary/dividend? as she has used some savings before the money got paid.
Best she just sorta out an accountant to advise the best way to pull it out.
How much did she personally put into the company over its short life in the form of cash and/or assets?
Did she pay any of the business costs incurred out of her own pocket.
The company may actually owe her some money back in respect of these costs so she can withdraw that amount out of the company bank account to clear the debt the company owes her.
She will need to complete a Corporation Tax return for the period the company traded so she needs to set aside a sum of the cash in the company bank account to cover that liability.
Was the company set up for PAYE or VAT?
Did she pay any of the business costs incurred out of her own pocket.
The company may actually owe her some money back in respect of these costs so she can withdraw that amount out of the company bank account to clear the debt the company owes her.
She will need to complete a Corporation Tax return for the period the company traded so she needs to set aside a sum of the cash in the company bank account to cover that liability.
Was the company set up for PAYE or VAT?
It all depends how much tax she is happy to pay on it.
When I stepped back into PAYE and wound my company up taking dividends over the tax free allowance as a higher rate tax payer was to be avoided so in the first tax year as an employee my pension contributions were 40-50% of salary keeping me in the lower PAYE band and allowing me to take dividends from the company at a reasonable tax rate). Or, if you don't need the money now, put it into the directors pensions (cost to business so avoids corporation tax but may be taxable when paid as pension).
She needs to talk to her accountant and they need to look at the whole picture, not just the Ltd Co.
When I stepped back into PAYE and wound my company up taking dividends over the tax free allowance as a higher rate tax payer was to be avoided so in the first tax year as an employee my pension contributions were 40-50% of salary keeping me in the lower PAYE band and allowing me to take dividends from the company at a reasonable tax rate). Or, if you don't need the money now, put it into the directors pensions (cost to business so avoids corporation tax but may be taxable when paid as pension).
She needs to talk to her accountant and they need to look at the whole picture, not just the Ltd Co.
IJWS15 said:
It all depends how much tax she is happy to pay on it.
When I stepped back into PAYE and wound my company up taking dividends over the tax free allowance as a higher rate tax payer was to be avoided so in the first tax year as an employee my pension contributions were 40-50% of salary keeping me in the lower PAYE band and allowing me to take dividends from the company at a reasonable tax rate). Or, if you don't need the money now, put it into the directors pensions (cost to business so avoids corporation tax but may be taxable when paid as pension).
She needs to talk to her accountant and they need to look at the whole picture, not just the Ltd Co.
Definitely seems a bit more complex than first thought. She going to get some recommendations from friends for an accountant to help happy to pay what’s due but like anyone else the legally least amount as possible!When I stepped back into PAYE and wound my company up taking dividends over the tax free allowance as a higher rate tax payer was to be avoided so in the first tax year as an employee my pension contributions were 40-50% of salary keeping me in the lower PAYE band and allowing me to take dividends from the company at a reasonable tax rate). Or, if you don't need the money now, put it into the directors pensions (cost to business so avoids corporation tax but may be taxable when paid as pension).
She needs to talk to her accountant and they need to look at the whole picture, not just the Ltd Co.
Patch1875 said:
Definitely seems a bit more complex than first thought. She going to get some recommendations from friends for an accountant to help happy to pay what’s due but like anyone else the legally least amount as possible!
Has she actually registered the Company at Companies House?To have done so she needs to have jumped through a few hoops, and normally with the help of an Accountant. As part of that she may have registered for PAYE and CT.
has she done any of the above?
Countdown said:
Has she actually registered the Company at Companies House?
To have done so she needs to have jumped through a few hoops, and normally with the help of an Accountant. As part of that she may have registered for PAYE and CT.
has she done any of the above?
She set it up herself online.think it’s also set up for paye etc.To have done so she needs to have jumped through a few hoops, and normally with the help of an Accountant. As part of that she may have registered for PAYE and CT.
has she done any of the above?
Patch1875 said:
Countdown said:
Has she actually registered the Company at Companies House?
To have done so she needs to have jumped through a few hoops, and normally with the help of an Accountant. As part of that she may have registered for PAYE and CT.
has she done any of the above?
She set it up herself online.think it’s also set up for paye etc.To have done so she needs to have jumped through a few hoops, and normally with the help of an Accountant. As part of that she may have registered for PAYE and CT.
has she done any of the above?
id suggest she gets an accountant to go through her accounts. That would point the way towards the best way to close the company down.
Countdown said:
Has she been submitting payroll returns to HMRC? How much has she paid herself?
id suggest she gets an accountant to go through her accounts. That would point the way towards the best way to close the company down.
Nothing paid so far money only recently got paid. She’s only paid out for some purchases so far.id suggest she gets an accountant to go through her accounts. That would point the way towards the best way to close the company down.
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