Need to move rental but self assessment salary is low (Company director) - Other ways?

derobe

Grumpy_chap said:

gazfocus said:

All we have to go on is what the OP has stated. I am not putting a twist on anything. 

In the first post of this thread, the op stated he declared £9,900 salary and £1k dividends, so I don’t understand how you come to the conclusion that the ‘probably bill’ was likely taken as dividends. 

Yes, the OP did say:

derobe said:

my self assesment that's just been submitted shows I only took £9900 in salary + £1000 in Dividends due to there only being a break even/marginal profit for the company during the 23-24 tax year.

At present I pay myself around £2500/£30k with the company still being profitable each month

And later:

derobe said:

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

I take the two posts together and they refer to different tax periods.

In tax year 2023 - 24 (so the tax return just completed), the OP drew £10k salary plus £1k dividend.  The dividend will have used the dividend allowance so attracts no income tax liability.  The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Then we have the OP's following statement "at present I pay myself £30k" so this must mean the current tax year 2024 - 25.  The OP states £11k of the £30k is declared as salary.  That leaves three options for the remaining £19k:
 - allowable expenses (which some probably is, mileage or home office costs and such like)
 - dividend
 - loan from the Ltd Co to the OP

Given the OP has an Accountant, and the Accountant will be mindful of their PI cover plus their professional standing, I think we can be fairly sure that the proper tax is being (or will be when tax return is prepared) declared and paid in relation to the £19k.  It is also unlikely the Accountant has gone down the Director Loan route given the complexity that can arise and the OP's lack of accounting awareness.
It is also apparent that the OP does not have enough insight to this to actually know and understand how the current drawings are being recorded.
I really hope the OP will see the difficulty in demonstrating this income for a rental as a prompt to become more clued up.
The OP also needs to be aware that the £19k of drawings that are not declared as salary, so presumed dividend, will give rise to an income tax liability that has not been deducted at source via PAYE but will fall due by January 2026 at the latest.  The OP needs to put 20% of this (so £4k across the year) into a savings account so the money is there to pay the income tax bill when it falls due.

I think the OP has been unwise to simply leave this all to the Accountant with little understanding themselves, but I do not see that the OP and the Accountant are on the fiddle.

Yes this is accurate. There's no "fiddling" going on.

I appreciate all of the comments and recommendations, I'm aware I now need to start being a lot more clued up on the financial side of the business. I'm well out of my depth even reading some of the comments, not understanding the terminology or abbreviations being used.

In regards to why I started the thread I think that's been answered and I'll need to find a private landlord who's happy with bank statements and start paying myself a little more and go looking in 3 months time so I can find a good property.

I also considered looking into a mortgage in my situation but think I will leave that for another day, carry on renting and focus on becoming more profitable for now!

Dazed_and_C0nfused

Grumpy_chap said:

Dazed_and_C0nfused said:

The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Only if the earnings were reported correctly under the RTI system.

And from what the op has posted so far I'm not convinced that that has happened.

You could be correct, but one would expect that the Accountant has done their job correctly even if the OP is not knowledgeable.  (I note your comments upthread about some Accountants being seemingly unaware of the reporting need, which is shocking.)
The OP also states they started their Ltd Co. in 2021, so I assume (which can be risky) the Accountant has been involved for four years now.  

This is one.  I'm sure it must have been an interesting discussion between accountant and client!

https://www.accountingweb.co.uk/any-answers/does-a-salary-below-the-reporting-and-tax-payable

Grumpy_chap

derobe said:

I also considered looking into a mortgage in my situation but think I will leave that for another day, carry on renting and focus on becoming more profitable for now!

Should you consider the mortgage route in the future, you will require two consecutive years of "viable" accounts supporting SA302 declarations and will then find it relatively straightforward assuming you engage the services of a Broker with experience in arranging mortgages for Ltd Co. Owner-Director.

Good luck with whatever you do.

Grumpy_chap

Dazed_and_C0nfused said:

Grumpy_chap said:

Dazed_and_C0nfused said:

The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Only if the earnings were reported correctly under the RTI system.

And from what the op has posted so far I'm not convinced that that has happened.

You could be correct, but one would expect that the Accountant has done their job correctly even if the OP is not knowledgeable.  (I note your comments upthread about some Accountants being seemingly unaware of the reporting need, which is shocking.)
The OP also states they started their Ltd Co. in 2021, so I assume (which can be risky) the Accountant has been involved for four years now.  

This is one.  I'm sure it must have been an interesting discussion between accountant and client!

https://www.accountingweb.co.uk/any-answers/does-a-salary-below-the-reporting-and-tax-payable

Yes, that looks like an Accountant will have some explaining to do.  Maybe there are enough years for the individual to not worry about it in the fullness of time.

In fairness, the issues around IR35 meaning that some Ltd Co. Owner-Directors flip between Ltd Co. outside IR35 contracts and then UC inside IR35 contracts adds further complexity.  I actually got caught with a partial NI year when doing that as I left the payroll open with my Ltd Co. in parallel to the UC income but did not actually process any zero-value payroll from the Ltd Co. for those months so it showed the year as "not full".  Not that it is an issue for me as I cannot accrue any more pension years but it could be for others.
Another example where our excessively complex taxation system needs to be simplified.  That really has to be a discussion for somewhere else.

At least, for the OP in this thread, they seem to have got the information (if not the answers) they need.

silvercar

OP explains that he doesn’t understand exact details, which would be exactly the reason he employs an accountant!

maybe the solution to the rental problem is for the estate agent or landlord to accept a letter from the accountant that OP can afford the rent.

dinosaur66

if you have decent amount of savings you could show that to a landlord as proof of affordability

i rented a property to OAP s in 2016 both retired and bungalow in question is way above govt subsidy level for rented propertys

they showed me there savings /gave me explanation as to why they wanted to rent and after a few checks i agreed

gazfocus

derobe said:

Grumpy_chap said:

gazfocus said:

All we have to go on is what the OP has stated. I am not putting a twist on anything. 

In the first post of this thread, the op stated he declared £9,900 salary and £1k dividends, so I don’t understand how you come to the conclusion that the ‘probably bill’ was likely taken as dividends. 

Yes, the OP did say:

derobe said:

my self assesment that's just been submitted shows I only took £9900 in salary + £1000 in Dividends due to there only being a break even/marginal profit for the company during the 23-24 tax year.

At present I pay myself around £2500/£30k with the company still being profitable each month

And later:

derobe said:

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

I take the two posts together and they refer to different tax periods.

In tax year 2023 - 24 (so the tax return just completed), the OP drew £10k salary plus £1k dividend.  The dividend will have used the dividend allowance so attracts no income tax liability.  The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Then we have the OP's following statement "at present I pay myself £30k" so this must mean the current tax year 2024 - 25.  The OP states £11k of the £30k is declared as salary.  That leaves three options for the remaining £19k:
 - allowable expenses (which some probably is, mileage or home office costs and such like)
 - dividend
 - loan from the Ltd Co to the OP

Given the OP has an Accountant, and the Accountant will be mindful of their PI cover plus their professional standing, I think we can be fairly sure that the proper tax is being (or will be when tax return is prepared) declared and paid in relation to the £19k.  It is also unlikely the Accountant has gone down the Director Loan route given the complexity that can arise and the OP's lack of accounting awareness.
It is also apparent that the OP does not have enough insight to this to actually know and understand how the current drawings are being recorded.
I really hope the OP will see the difficulty in demonstrating this income for a rental as a prompt to become more clued up.
The OP also needs to be aware that the £19k of drawings that are not declared as salary, so presumed dividend, will give rise to an income tax liability that has not been deducted at source via PAYE but will fall due by January 2026 at the latest.  The OP needs to put 20% of this (so £4k across the year) into a savings account so the money is there to pay the income tax bill when it falls due.

I think the OP has been unwise to simply leave this all to the Accountant with little understanding themselves, but I do not see that the OP and the Accountant are on the fiddle.

Yes this is accurate. There's no "fiddling" going on.

I appreciate all of the comments and recommendations, I'm aware I now need to start being a lot more clued up on the financial side of the business. I'm well out of my depth even reading some of the comments, not understanding the terminology or abbreviations being used.

In regards to why I started the thread I think that's been answered and I'll need to find a private landlord who's happy with bank statements and start paying myself a little more and go looking in 3 months time so I can find a good property.

I also considered looking into a mortgage in my situation but think I will leave that for another day, carry on renting and focus on becoming more profitable for now!

Happy to hold my hands up and apologise for reading the posts wrong. 

One thing you might be able to do is ask your accountant to generate payslips to match the payments made into your bank from your ltd company. 

Grumpy_chap

gazfocus said:

One thing you might be able to do is ask your accountant to generate payslips to match the payments made into your bank from your ltd company. 

Hopefully the OP has Ltd Co. payroll being run for the salary being drawn.  This is necessary for the proper NI credits to be accrued, as DaC noted upthread.

With regard to the £20k that is most likely being drawn as dividends, there is no need to convert this to salary, but the OP needs to be aware that when the tax return is prepared for 2024-25, there will be a tax liability to pay by the end of January 2026.  Assuming no other significant income, that will be around £4k.
In addition, the OP should expect that payments on account will be required by the end of January 2026, likely to be around £2k (so £6k total in January, £4k tax plus £2k PoA).  Then another PoA, again likely to be £2k to be paid next July (2026).
Better that the OP is aware of these potential tax bills now than reaching January and unable to respond to a shock.

Let's hope the OP is still reading.

derobe

dinosaur66 said:

if you have decent amount of savings you could show that to a landlord as proof of affordability

i rented a property to OAP s in 2016 both retired and bungalow in question is way above govt subsidy level for rented propertys

they showed me there savings /gave me explanation as to why they wanted to rent and after a few checks i agreed

I've got a decent amount in my business account (24months of operating expenses) but not my personal account (pretty dormant).

Do you think a landlord would accept this or would they only accept personal savings?

dinosaur66

yes i would

and i am a long time landlord

from my perspective i just want to make sure if things go wrong for a tenant that they have the funds to support themselves and pay the rent even if unexpected things arise

£20k in an business account would be more than acceptable to a landlord

it proves you are working and have funds

thats what a landlord wants to see

it would make you a good pick