self-assesment and impact of new ltd?

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MoneySavingMission
MoneySavingMission Posts: 220 Forumite
in Cutting tax
I submit a self-assesment as have income from employment and property.

I'm thinking about setting up a ltd company in this tax year. How is this treated within self-assessment?

Or is it completely separate as accounts are corporate and registered annually. Do I totally exclude earnings under ltd for purpose of self-assessment?
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  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
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    Your Ltd company!!!8217;s earnings are reported on a corporation tax return and in its annual accounts.

    You only need to report on your self assessment any income you receive from your company. If that!!!8217;s salary it goes on a second employment sheet, if it!!!8217;s dividends it goes in the appropriate box.
  • MoneySavingMission
    MoneySavingMission Posts: 220 Forumite
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    I haven't established a ltd company yet in this tax year.
    so they are totally separate then. corporate tax return for any ltd income and exclude from personal self-!!! to detail employment income (paye) and rental income for the tax year?
    I just wasn't sure how this was treated if one tax year has both scenarios.
    or do I still have to disclose ltd income on my self-!!! after it's 1st year accounts are complete?
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    MoneySavingMission wrote: »
    do I still have to disclose ltd income on my self-!!! after it's 1st year accounts are complete?

    No, completely separate legal entity. On your personal SA return, you just declare payroll and dividends paid by your ltd to yourself. If it's paid you nothing, then there's nothing to declare.
  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
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    Just remember your Ltd company’s money and retained profits are not yours. You can’t spend it personally without paying yourself first. Normally this would be dividends if you’re a shareholder but it could be a salary to. An accountant would be able to advise you on the best strategy.
  • MoneySavingMission
    MoneySavingMission Posts: 220 Forumite
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    is it essential to have an accountant for ltd company?

    I see lots of companies advertising on google for setting up the ltd company and doing all the admin associated.

    It will be straightforward - day rate less expenses.

    it would prob be easier if I started it in the new tax year - its this potential combination that's confusing. E.g. tax year 17/18 I've got my normal self-assesment which i'll file after tax year end. If I incorporate a ltd company for a new contract role in March this will also feature within the tax year. I know you only prepare accounts annually, so would this not be an issue until 1yr since incorp?

    thanks for guidance.
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    MoneySavingMission wrote: »
    is it essential to have an accountant for ltd company?

    Yes, if you don't know what you're doing. Can you do the company's payroll and work out the most efficient amount of salary to pay? Can you calculate the optimum dividend levels at draft the paperwork for them? Can you prepare management accounts, including reversals, provisions and tax provisions, in order to arrive at a maximum post tax profit figure for dividend?

    People pay huge amounts of tax unnecessarily because they don't get the timing right and the split right, when drawing payroll/dividends from their companies.

    By the time you've passed the year end, it's too late to pay wages and dividends if you've not, and too late to change if you've paid the wrong amounts.
  • MoneySavingMission
    MoneySavingMission Posts: 220 Forumite
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    looks like I need an accountant then. I can operate my own paperwork once established but it's the area of set-up and starting to operate it that's confusing me.
    I know it's best to have a business bank account to keep this completely isolated away from personal accounts. I won't do umbrella company, lost a fortune on last contract role paying to run it.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    MoneySavingMission wrote: »
    looks like I need an accountant then. I can operate my own paperwork once established but it's the area of set-up and starting to operate it that's confusing me.
    I know it's best to have a business bank account to keep this completely isolated away from personal accounts. I won't do umbrella company, lost a fortune on last contract role paying to run it.
    given your confusion it is essential that you seek professional advice from an accountant.

    as mentioned above, a company is a separate legal entity. Until you get that clear in your own mind you will remain at risk of making horrendous mistakes. There is no question about separate bank accounts, do you share your bank account with your next door neighbour? He may be your friend, but he is not you and his expenditure is not from your bank account.
  • MoneySavingMission
    MoneySavingMission Posts: 220 Forumite
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    theres been a lot in the press yesterday about bbc newsreader using a ltd company - some claim it's illegal. but its not.
    I'm a contractor on short-term assigments, I wouldn't be doing anything illegal.
    I've sought accountancy advice and will pay an accountant for services.

    does anyone think the ltd company structure could change?
  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
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    Depending on what you do you may need to consider IR35 rules. The aforementioned BBC case was a result of the worker being caught by IR35 rules.

    It!!!8217;s not illegal to work through a Ltd company. Even if you are caught by IR35 rules so long as you handle the tax situation correctly.
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