Any tax allowances I'm missing out on?

waveneygnome

I have used MSE several times, but never realised this forum existed, and wondered if anyone can help.

I am a shareholder/employee of a Ltd co.

I receive a salary of £5700 pa
I receive dividends which vary depending upon how we preform in the year
I have no other income

I claim my personal allowance
I claim tax relief on the interest on the loan I took out to buy the shares
I am in a 'fixed profit car scheme' - which pays 40p per mile for verified business use only

Are there any other allowances I could claim?

I use my computer at home for at least 2hrs a day for work use
I use internet researching new machines at home
I have set-up a mini 'work office space' at home
I wear a co. uniform, and because I maintain most of the machinery get filthy = washing all the time

We have a company accountant (whom I don't particulary like - but the other shareholders are friends of his so won't consider moving) and when I try and ask him about things he always says 'its not really worth the effort'. An example of this was the loan I took out to buy into the business - it was me who researched whether it was possible to claim for the interest payments - I'm glad I did because its saving me a few thousand each year.

BoGoF

What level of dividends have you been taking? Enough to take you into the higher rate tax bracket?

waveneygnome

No, dividends have been around £20k per year.

BoGoF

Well in that case there is no point claiming anything as you are not paying tax anyway. If that has been the case for the years when you claimed the interest payments it would not have saved you thousands like you seem to think.

Your salary is covered by your personal allowance and your dividend tax credit takes care of itself.

waveneygnome

I may have got this wrong, but I am paying £3600 per year in interest payments on a loan I took out to buy into the business.

I put this down as a qualifying loan, and asked HMRC if they could amend my tax code, which they have done for the past 7yrs. So my tax code is BR+£3600.......................thats what I meant by saving me a few thousand each year.

BoGoF

Fraid you're not actually gaining anything from it though.

If your income is below the level of the personal allowance then it makes no difference what is in your code - you would still pay no tax either way. You only get tax relief if you are actually liable to tax in the first place.

waveneygnome

OK......I think I see what you mean.

The £5700 salary has only just been this year. I was receiving £11k p.a. for the past 6 yrs. (After three years of nagging the accountant agreed it would be better to lower our salaries & increase dividends)

chrismac1

If it took 3 years of nagging to get him or her to do this "box standard" item then you shouild switch. Meanwhile you can tell him or her that 7,224 - 602 per month - is the optimal level of salary for 2011-12 tax year and ensure this is what you book.

Please see an earlier post of mine on this site where there was a debate running about this, where I explained to someone else why it is 602 and not 589, if this guy should suggest it is 589.

waveneygnome

Great, thanks Chris.

I would love to change accountants, but there are two other partners (both senior in age and experience) and they are friends of the accountant and wouldn't dream of changing.

For the avoidance of any doubt - I may not be personally liable for tax on an income of close to £26k (5700 +20000) - our company does pay corporation tax, last year it was £31k, this March it will be £24k......................didn't want anyone thinking I was in the realms of Stephen Hestor or Tony Blair!

gsk

Be careful about declaring that you use any portion of your domestic property 100% for business as you may be liable for CGT on a proportion of your house value when you come to sell it. Encourage your kids to do their homework in there or something