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

Atidi

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

Yes you will be required to declare all your income in any self assessment form you complete.

No you should not have to pay any more tax if all your earnings have already been taxed at the appropriate rate.

(If you have any current taxable income that is not currently taxed, then you should be reporting this to HMRC anyway)

Atidi

trailingspouse wrote: »

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.

How would it change the game, exactly?

Mistral001

2bFrank wrote: »

Hello,

I want to have in the bank a years worth of salary before I take the plunge.

Good attitude to take. If more people took it there would be fewer failed startups.

trailingspouse

You'd be subject to the full corporation tax rate, rather than the small companies rate.

20% is a lot - if you're continuing to trade but leaving a lot of money in interest-bearing accounts, it's unlikely to become a problem. But by the same token, it's worth knowing about.

Atidi

trailingspouse wrote: »

You'd be subject to the full corporation tax rate, rather than the small companies rate.
...

So 21% instead of 20%?

On interest earned, which will be peanuts if any at all?

trailingspouse

Fair comment - didn't know it had changed.

Majestic12

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.

You are correct that directors do not have to fill out a self assessment form, just because they are a director. HMRC's .gov website is actually wrong! However it would have been better to link to some sources...

As a new user I cannot post links but please google the words EM4551 and HMRC together. This is HMRC's own manual with a very key phrase:

“There is no requirement to notify chargeability where there is no liability to Income Tax or Capital Gains Tax or where sufficient tax has been deducted at source to meet the net liability for the year.”

If you also google ACCA and EM4551 they talk about the topic of directors self assessment and that it is not required if tax is sufficient deducted at source and there is no other capital gains or inheritance tax liability.

:beer::beer:

Aquamania

Majestic12 wrote: »

You are correct that directors do not have to fill out a self assessment form, just because they are a director. HMRC's .gov website is actually wrong! However it would have been better to link to some sources...

As a new user I cannot post links but please google the words EM4551 and HMRC together. This is HMRC's own manual with a very key phrase:



If you also google ACCA and EM4551 they talk about the topic of directors self assessment and that it is not required if tax is sufficient deducted at source and there is no other capital gains or inheritance tax liability.

:beer::beer:

Welcome

But you will automatically be sent a demand to complete a tax return when you register as a director with companies house.
(unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)

And then you will be required by law to return it

As you said, better to provide a link to a source:
http://www.hmrc.gov.uk/sa/need-tax-return.htm

You must complete a return if you're any of the following:

• a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)
• a minister of religion (any faith)
• a name or member of Lloyd's

Majestic12

By law yes you do have to fill one in if you have been sent one, however on another forum I am on (UK Business Forums), there has been cases where people have managed to persuade HMRC to disregard the notice if they have very simple employment income where tax is already deducted. Its as if HMRC are concerned just because someone is a director, they will automatically take dividends. A lot of qualified folk on that forum also agree that a self assessment is not necessary for directors, there is no statutory "law" that a director must register for self assessment

But HMRCS tax return section contradicts what is mentioned in their own manual, which I cannot link at the moment.

Aquamania

Majestic12 wrote: »

By law yes you do have to fill one in if you have been sent one, however on another forum I am on (UK Business Forums), there has been cases where people have managed to persuade HMRC to disregard the notice if they have very simple employment income where tax is already deducted. Its as if HMRC are concerned just because someone is a director, they will automatically take dividends. A lot of qualified folk on that forum also agree that a self assessment is not necessary for directors, there is no statutory "law" that a director must register for self assessment

But HMRCS tax return section contradicts what is mentioned in their own manual, which I cannot link at the moment.

Did you even read the link I posted earlier?

It explains what to do if "HMRC has asked you to complete a tax return and you've checked the information above and think you don't need one."

But as a company director, they will probably refer you to the part I previously quoted

If you think the HMRC website is wrong, I can't fix it; you need to get HMRC to do that for you. Should be a breeze for you and your fellow experts on that other forum you prefer to take your information from.

Until it's changed, I will continue to advise based on what HMRC currently publish there.