Corporation Tax.

[ChrisR]

Hi guys.

A few years ago I decided to go limited as the government were allowing the first 10k turnover tax free. Six months later they stopped it due to the not surprising overwhelming applications for limited status.

Today my accountant has advised me my Corporation tax bill will be around £2400.00.

My accountant says this is worked out from the profit the company has made and the yearly bonus i take.

I dont make a profit and have never taken any bonus so how the hell does this work.

My sole reason for going ltd was to get something back but now I`m paying considerably more for what I see as nothing and I`m paying PAYE as well and I`m still a sole trader.

Too say I`m pissed off would be close to the truth.

I`ve made an appointment to see my acccountant when I`m back from holiday(04/06).

Any views guys.Dont expect any from me until after 04/06.

Cheers.

Chris. 😯

[Alex]

Re: Corporation Tax.

Yearly bonus? I assume you mean Dividends.

If you pay yourself a wage over and above £100 p.w. then expect to be on PAYE. You will be subject to tax on your dividends, but a lower rate.

The corporation tax is the tax on the business profits, whether you pocketed them yourself or put in the bank. There is still a liability.

Theyv’e got you all ways.

alex

[Martin]

Re: Corporation Tax.

ChrisR wrote:and I`m still a sole trader.

A sole trader registered as a limited company paying corporation tax?

How did you ever get in that mess Chris?…..sack your accountant for his incompetence would be a good start !!!! 😉

[Goatboy]

Re: Corporation Tax.

We’re a limited company (of 2 people). Me and Goatboy Senior, get paid £100 pw. We do pay national insurance. Then we give ourselves a monthly dividend 🙂

We pay corperation tax, but it works out better than operating as a sole (dual) trader.

[admin]

Re: Corporation Tax.

Hi Chris,

A common mistake made by us engineers is to not count your van stock as profit. It could be that you make no cash profit but have £10,000 of stock that you have effectively bought from your operating profit, therefore you will have a tax liability on this.

Hope that helps

Kevin

[ChrisR]

Re: Corporation Tax.

Thanks guys for your comments.With 105 hits and only 3 replies I suppose the writings on the wall. 😉

[burns]

Re: Corporation Tax.

Hi Chris,
You really need to speak with your accountant regarding this but if this helps.Like you we went down the road of limited to enable a small wage and dividends at the time it was 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} on dividends rather than the normal 22{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} basic tax or 40{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} (higher rate).
I dont think your accountant advised incorrectly as it was never seen coming that Gordon Brown would hit this and hike it up to 19{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} “milkman tax” as quoted.
Although I now run my business on a part-time basis and in the main I am employed. The business is subject to capital gains on profit.

One thing you could ask your accountant about is the possibility of a directors loan. As a director you can take a tax free loan from your business on an annual basis upto I may be corrected £4000 per annum.
This loan can be written off in due course and need not be paid back to the business.

For some time now I have shown three items on my spreadsheet.
1/ wage 2/ dividends 3/ loan account.

Although I only draw off a small amount per month now, my accountant did show a wage to claim the allowance for filing online. This was promptly followed by a cheque from the Inland Revenue for £250

From days of old it never seemed fair, even when you think youve had a poor year the tax still hits.
Your accountant needs to be proactive in reducing this. The best advice anyone could give is open a seperate account and transfer a amount per month every month, dont use that account for anything else so it can be seen each payment. When the tax bill hits you, you are prepared for it.
Then transfer the money back into your business account and pay the capital gains and personal tax which you will get.

Take some comfort from the fact 19{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} is less than 22{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} on dividends and keep your wage just above the minimum limit for national insurance, so as to not loose your basic state pension in your old age.
Whatever that may be when we get to it.
Wont that toolbox seem heavy when your 85….. 😥

[ChrisR]

Re: Corporation Tax.

Thanks burns for that.

Some good points.I`m seeing the accountant on Thursday.

[Author]

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