16/17 Tax Year Startup

jknightg1

I started my small consultancy business last November. My plan is to not draw any salary (I had a package from my last employer), Not to draw any dividends (To create a cash flow buffer) Claim back my invoiced expenses. Pay the VAT man and treat the remainder as profit, hence paying Corp Tax. Am I doing anything daft? Sorry for the simple question, I am new to this....
Regards
John

TheCyclingProgrammer

No, it sounds like you've got the right idea. If you've got enough savings set aside to live then you're best off trying to accumulate some retained profits in the company. No point in paying a salary until the new tax year at which point its usually normal to take a tax efficient salary combined with dividends.

Remember you can reclaim some of the costs you incur personally in doing your job (like travel, subsistence, accommodation and business calls) from YourCo even if you aren't re-charging them to clients. The general rule for employee expenses are that they are incurred wholly, exclusively and necessarily for the purpose of doing your job but make sure you're aware of the rules regarding travel and subsistence and temporary workplaces, particularly if you're working at a client site.

Any salary or expense payments you make to yourself will reduce the company's corporation tax bill. There are of course other expenses that your business can incur that will reduce its CT bill too - accountancy fees, software, banking costs, equipment etc. I would advise trying to make sure you pay for these kind of expenses (basically anything that is for the business itself rather than costs you incur doing your job) directly from the company bank account and getting invoices in the company name (this is essential if you are reclaiming the VAT) and keep your money and company money separate.

The only thing you haven't mentioned is whether or not you have an accountant. If you don't I would recommend you get one, a good one will save you money in the long run.