Keeping money in limited company and not taking a wage or dividend

2bFrank

Hello,

I am a mobile developer with a full time job developing mobile websites and mobile applications.

I have been doing a bit of moonlighting recently for friends and acquaintances developing websites and mobile apps. The money has been cash in hand and the amount is really just extra beer tokens. Due to word of mouth from these friends and acquaintances, a lot more work has been coming in and I am charging a more substantial amount for the work involved.

I want to be a freelance developer in the next three years and I am saving up to make this happen. I want to have in the bank a years worth of salary before I take the plunge.

I was thinking of setting up a limited company, and keeping the money that I earn in the company, then, in the three years, hopefully I will have enough to start freelancing full time.

Before I do this I have a couple of tax questions
Am I able to keep the money in the limited company?

I know I have to pay corporation tax on the profits, however is there any hidden taxes I will have to pay to keep the money in the company?

As i will not be taking a wage from the company for a long while, nor any dividends, Will I have to register for self assesment tax? It would not make any sense to take any wages from the company as I am in full time employment and already nearing the higher tax bracket limit, id rather keep the money in the company.

Any help or a quick poke in the right direction would be great.

Thanks

InsideInsurance

2bFrank wrote: »

Am I able to keep the money in the limited company?

I know I have to pay corporation tax on the profits, however is there any hidden taxes I will have to pay to keep the money in the company?

As i will not be taking a wage from the company for a long while, nor any dividends, Will I have to register for self assesment tax?

yes

only corp tax on any interest received

i believe so as a director

Suarez

To be honest, your self assessment will be so simple that it wouldn't be any cause for concern. It will just have your salary from your P60 and any interest your earn on savings.

zygurat789

Suarez wrote: »

To be honest, your self assessment will be so simple that it wouldn't be any cause for concern. It will just have your salary from your P60 and any interest your earn on savings.

As a director it would be wise to do a page with nil salary.

Aquamania

zygurat789 wrote: »

As a director it would be wise to do a page with nil salary.

Why? :huh:

According to SA150 - How to fill in your Tax Return

You will not need to complete an Employment page if you:
• ...
• were a company director and received no payments of any kind or benefits from that directorship

http://www.hmrc.gov.uk/worksheets/sa150.pdf

Suarez

Aquamania wrote: »

Why? :huh:

According to SA150 - How to fill in your Tax Return


http://www.hmrc.gov.uk/worksheets/sa150.pdf

...is the correct answer...:)

2bFrank

Thanks guys and gals. I'm glad to hear I can keep the money in the company and save it. Bit worried by having to do a self assessment though. I get paid through my full time work and pay tax before I get my wage, will I have to declare this each year and pay any more tax? I looked for a accountant but there are around £80 a month, this would be a dint in the amount of money I'll be getting if I have to use one.

Thanks again
Matthew

Suarez

2bFrank wrote: »

Thanks guys and gals. I'm glad to hear I can keep the money in the company and save it. Bit worried by having to do a self assessment though. I get paid through my full time work and pay tax before I get my wage, will I have to declare this each year and pay any more tax? I looked for a accountant but there are around £80 a month, this would be a dint in the amount of money I'll be getting if I have to use one.

Thanks again
Matthew

You will put your salary on your self assessment and any tax paid on that for the year so you won't have to pay any further tax on your job (Unless your tax code has somehow been incorrect for the year).

You can check here if you're unsure : http://www.moneysavingexpert.com/family/check-tax-code

Ps. Are you sure the £80 a month is for a self assessment and not lots of other services on top such as bookkeeping, payroll etc.

Pennywise

You don't voluntarily have to do a SA return nor inform HMRC that you've become a director which would trigger them sending you one.

There is no "LAW" requiring you to tell HMRC you're a director and start voluntarily doing SA returns, just because you're a director. The HMRC website and notes are wrong to say otherwise. Despite what HMRC website says, you don't have to register for SA just because you're a director and they can't impose penalties for failing to register on this ground alone.

But, like any person, HMRC may require you to complete a SA return if they tell you to do it. Volunteer to tell them and register by virtue of being a director and they will impose SA returns on you. Don't bother telling them and you're OK until you have to register for other reasons (which are required by law) such as becoming liable to HR tax, untaxed income, etc.

trailingspouse

I don't know what figures you're talking about here, but be aware that if more than 20% of the company's income is profit from investments, HMRC can class you as an investment company, which is a game changer.

Atidi

Pennywise wrote: »

You don't voluntarily have to do a SA return nor inform HMRC that you've become a director which would trigger them sending you one.

There is no "LAW" requiring you to tell HMRC you're a director and start voluntarily doing SA returns, just because you're a director. The HMRC website and notes are wrong to say otherwise. Despite what HMRC website says, you don't have to register for SA just because you're a director and they can't impose penalties for failing to register on this ground alone.

But, like any person, HMRC may require you to complete a SA return if they tell you to do it. Volunteer to tell them and register by virtue of being a director and they will impose SA returns on you. Don't bother telling them and you're OK until you have to register for other reasons (which are required by law) such as becoming liable to HR tax, untaxed income, etc.

But there is a law that requires Companies House to be informed that you are a director of a particular company