Can't ask Accountant - sensitive issue

[VEX]

What is the current tax rate for company drawings based on minimum salary and then dividens?

Ta

V.

[Simpo Two]

What is the 'minimum salary'?

[Doofus]

Drawings, salary and dividen(d)s are three different things, with taxation ranging from nought to some.

When you say that you can't ask your accountant, is that because you don't know the question?

[Countdown]

By drawings I assume you mean withdrawal of original capital investment then there's no tax charge.

Tax on salary and dividends depends on how much is paid in each case.

[Eric Mc]

"Drawings" as a concept does not exist when speaking about limited companies and their directors.

If a director gets paid because of his duties as an officer of the company or in respect of the work he performs in the company, that is classed as "Remuneration" (i.e. salary) and will be taxed under the normal PAYE rules (and will also be subject to Employee's and Employer's NI)

If the director is also a shareholder, money can be paid to him/her out of company profits in the form of dividends.
Different tax rules come into play for dividends and no NI is chargeable.

[anonymous-user]

And if you can't ask your accountant this, you need a new accountant asap.

[VEX]

Ok, I can't ask accountant for none of the reasons you have assumed, so let's park that one.

Thanks to Eric and Toxic for the info. Yes it is a Ltd co and mix will be renumeration and dividen.

I just wanted to check what the %age breaks were.

Maybe I didn't think the wording through fully before posting.

V.

[Eric Mc]

Yes - you need to clarify HOW you intend to "draw" money out of teh company -

Salary

Dividend

Combination of both

Expense claims

Repaymnent of moneys owed to director by company (if applicable)

[Ilovejapcrap]

VEX said:

Ok, I can't ask accountant for none of the reasons you have assumed, so let's park that one.

V.

Why put it in title then, can we guess !

[blearyeyedboy]

If there's a conflict of interest, can you engage a different accountant solely for the purpose of answering this question, and then using your usual one for ongoing accounting duties?

I once did exactly this for a different accounting issue where I needed an independent voice.

[andyb28]

My company pays me a minimum wage, some call it a directors salary.

It's £4,697 per year gross.
All over monies are paid to me in the form of dividend.

Perhaps thats what the OP meant?

[Dixy]

Is it prudent to have the salary set at just over the NI threshold so it is counting to years for state pension, Does it need to be £750 per month or can it just be £1 a month over.

[Eric Mc]

andyb28 said:

My company pays me a minimum wage, some call it a directors salary.

It's £4,697 per year gross.
All over monies are paid to me in the form of dividend.

Perhaps thats what the OP meant?

Why is the salary set so low? You are missing out on building up credits for your National Insurance Contributions. And with the new changes to dividend tax, it might be wiser to place less reliance on maxing dividends as was the case in previous years.

[trickywoo]

This is quite useful for quick indications as regards salary / dividend balances http://www.itcontracting.com/calculators/2016-2017...

[richardxjr]

My wife and I are partners in a consultancy. We're just asking our accountants about trading as a Ltd Co with smaller salaries, corp tax and dividends. I'm wondering if the tax saving will be worth the extra paperwork and accountancy fees. Neither of us are on higher rate income tax and I doubt the savings are that much these days.

[Eric Mc]

There are always some savings going down the limited company route but it has to be said that the recent dividend tax changes have reduced some of the advantages. And, of course, the savings always were (and still are) most beneficial if some or all of the directors/shareholders are higher rate taxpayers.

Having said all that, I am extremely concerned about the proposed massive changes to the tax system which the government seems to be absolutely committed to under their Making Tax Digital (MTD) initiative. Those who will be most affected by these changes are sole traders and PARTNERS IN PARTNERSHIPS as they will be forced to make the equivalent of four (and possible five) personal tax returns each year.

So far, we have not heard much on HMRC's plans for limited companies under MTD.

[richardxjr]

^ Thanks Eric, hadn't yet heard of that. Does the present system need ruining fixing?

[trickywoo]

richardxjr said:

Does the present system need ruining fixing?

For the law abiding, no. However, as with so many of these things which end up inconveniencing and costing the innocent its designed to catch the wrongdoers who will inevitably still find a way to carry on their wrongdoing.

Being in the position myself I seriously think the recent attacks on small business will see any who can relocate to more sensible / friendly systems (countries) doing so.

Its really poor judgement from government, and a conservative one at that.

[richardxjr]

Just reading some of the consultation docs now. Will they really have this up and running properly in 18 months time?!?!

Govt, data and systems haven't exactly got a good track record have they?

Oh well, can't have too much effect on our little business. Glad I'm not an accountant for those affected though - nightmare.

[Eric Mc]

It is absolutely horrendous. I'm seriously considering retiring - and I'm not joking.

An awful lot of small firms of accountants will not be able to cope with the quadrupling of their workload.

So, small traders and partnerships will have three options -

do it themselves
find a large firm with the necessary resources (and much higher fees)
give up

Don't assume for one moment that it does not affect your "little business". It's the little businesses that are going to find this the most burdensome.


And no - there is not a cat in hell's chance that this will be working in just a year and a half.