How do I pay expenses from my limited company, to myself?

greensalad

WHA wrote: »

That's not confusing at all to any half decent accountant. It's bread and butter stuff as most people will have "split years" where they change their status mid way.

Like any service provider, there are good and bad, qualified and unqualified, and those who specialise in different business types. Your first choice seems to have been a bad one which is bad luck. Move on, talk to others and find one that meets you needs. I always say you should ask around friends/family if they'll recommend the one they use. If not, then go and talk to 3/4 qualified accountants and see how you gel with them. Most decent accountants will offer a free initial consultation, so take advantage of that.

Trying to do-it-yourself with a limited company seldom has a happy ending.

Good to hear that it's not such a mess as I thought it would be.

My big issue with the accountant I had an appointment with (plus two others I've had more informal chats with) is that they are dead set on my spreading my income over a year, or more. They all say that I must spread over a year to reduce tax.

My problem is that I have a lot of expenses coming up in the Spring, which is exactly the reason why I decided to go into contracting now as the money is good in comparison to my perm wage. I don't really want to spread my income over the next 12 months. I'm moving house. I'll be decorating, re-furnishing, probably buying a car, I have debt to pay off. I'm in a situation where having the bulk of the money almost as it's earned would be beneficial. Hopefully I can find an accountant who can show me both sides (how much I'd save from spreading my income) so I can decide how much I'm losing out on by not doing it that way.

chrismac1

I don't think the folk you've spoken to are qualified, or if they are they've not been keeping up. Your pre-trading expenses are fine. You can owe your limited company £10k with no taxable benefit in kind, and no extra corporation tax provided dividends and salary postings in the 9 months following the company year-end total at least £10k.

I'm not entirely sure what you mean by "spreading your income", but if it means "Can I take money out of the company bank account if it is there?" the answer is yes. Leave enough to cover corporation tax and VAT (if applicable) if you want to be on the safe side, but if you need the money short term just take it and make sure it is there on the corporation tax due date which will be 22 July 2017 if your incorporation date was 22 Oct 2015.

greensalad

chrismac1 wrote: »

I'm not entirely sure what you mean by "spreading your income", but if it means "Can I take money out of the company bank account if it is there?" the answer is yes. Leave enough to cover corporation tax and VAT (if applicable) if you want to be on the safe side, but if you need the money short term just take it and make sure it is there on the corporation tax due date which will be 22 July 2017 if your incorporation date was 22 Oct 2015.

What I mean by this, is that advice from ltd company holders in general and from what I have read online, is that directors generally aim to do the following:

- Withdraw a small salary below £10,600 over the financial year
- Withdraw the rest of the income as dividends spread over the year

I've been told this obviously reduces tax. For example, if a director only 'earned' £10,600 they wouldn't be taxed personally on that. And if the rest of the dividends fall under higher-rate (£42k) then they effectively pay no income tax.

My problem is that I just don't want to spread across the year because a) I currently have £20 in my personal bank account, plus debt (which is irritating when I'm billing good money!) I can't wait without a payout much longer to be honest and b) my expenses are due to go through the roof next Spring.

There's also the fact that having already gone over the £10,600 personal allowance this year I won't be able to pay zero income tax.

So hopefully I will be able to pay regular dividends as of next week, and pay out around 70% of what's in the company account at that time. That leaves 20% for the corporation tax and 10% for expenses and keeping some money in there...

Does that make sense?

p00hsticks

greensalad wrote: »

What I mean by this, is that advice from ltd company holders in general and from what I have read online, is that directors generally aim to do the following:

Withdraw a small salary below £10,600 over the financial year
- Withdraw the rest of the income as dividends spread over the year

That's because it;s usual for the income to be spread pretty equally over the year, whreas in your case it soudns liek the bulk of it will come in the next five months.

I can understand why you want to get as much money as possible out in the short term. However, longer term, you may find that there are benefits to becoming an employee of the comany and paying yourself a small salary - not least that if you pay above the NI Lower Earnings Limit you will be getting NI years to go towards your State Pension, which dividends alone won't earn you. (although if you are also going to do regualr permanent work on the side this may not be an issue for you - another thing you need to run past your accountant when you get one).

jaydeeuk1

Prothet_of_Doom wrote: »

The other risk is that HMRC hates 12 dividends in a year, Looks like a salary really.

I pay myself a small salary and dividends 12 times a year too (I do 2 separate bank transfers on pay day to make it easier to identify), my accountant hasn't said this is a problem (been doing it for last 3 years), is this something to worry about or is the fact I'm paying myself a salary means its ok?

greensalad

So the advice would be a small salary plus dividends monthly? I'll ask an accountant about this obviously. And make these withdrawals as two separate transactions each marked salary/dividend to give clarity?

SeniorSam

Really amazing that you have not yet found an accountant to take advice from. You certainly need it and that accountant may help you making silly mistakes and not just guessing at how to operate correctly.

Suggest you find an accountant soon and it's not that difficult, but you would then be more certain of how to operate.

Good luck.

Sam

greensalad

Yes, I am looking into it. I have contacted three but because I work all day, I'm not able to attend appointments with them. And accountants don't work on Saturdays. And I work such short contracts back-to-back that requesting time off is often not possible. Very hard to find an accountant comfortable working with a small amount of contact.

chrismac1

Not in this internet age it isn't!

Pennywise

greensalad wrote: »

Very hard to find an accountant comfortable working with a small amount of contact.

The internet is full of "remote" internet based accountants especially for personal service companies who are a very easy business. The days are long gone where you have to go and meet them in person. I've never met probably more than 75% of my clients, who come from all over the UK, and some are Brits living and working abroad.