Being a company director as a second job

[finlamit]

Hi everyone, need a bit of guidance here.

I have a main job in which I earn £60k pa. I have recently set up a business.

What would be the most tax efficient way of paying myself from my business? Lets say, to make it easy, I make £10k in profit in my first year. It's a tricky one for me to work out. Im already paying NI etc. in my main job, so need to pay is from any business income, so taking a salary would purely be for tax reasons.

Thanks in advance.

M

 

[Scalloway]

If you are higher rate taxpayer a salary does not make sense. If you take out profits by way of a dividend you will not pay NI on it.

Have you appointed an accountant yet? They will be able to advise you on the most tax efficient way to do things.

 

[pentel]

£750 / month PAYE. No NI, tax deductible on the company, but paye taxable

The rest in dividends, not tax deductible on the company so there will be corporation tax to CT to pay, however you can use your dividend allowance to minimise personal tax.

 

[finlamit]

If you are higher rate taxpayer a salary does not make sense. If you take out profits by way of a dividend you will not pay NI on it.

Have you appointed an accountant yet? They will be able to advise you on the most tax efficient way to do things.

Thanks. Not yet, but will do. Trying to gain a basic understanding before I engage someone.

I was just wondering, as dividends are not tax deductible, the company will pay 19% CT, and then I will pay 33.75% myself (over the £1000 tax free allowance). Would it not be better to take as salary which it tax deductable, and pay the higher 40% but be able to take out more?

 

[Newchodge]

£750 / month PAYE. No NI, tax deductible on the company, but paye taxable

The rest in dividends, not tax deductible on the company so there will be corporation tax to CT to pay, however you can use your dividend allowance to minimise personal tax.

I'm not sure that works. OP is a higher rate tax payer so they would pay 40% income tax to save 19% (10K profit) Corp tax.

 

[finlamit]

£750 / month PAYE. No NI, tax deductible on the company, but paye taxable

The rest in dividends, not tax deductible on the company so there will be corporation tax to CT to pay, however you can use your dividend allowance to minimise personal tax.

Thanks

Just wondering how you came to the figure £750? I already have a full time job on £60k so I wouldn't need to for any other reason than tax purposes.

Trying to weigh up:

19% on profits (CT), then 33.75% dividend tax
VS
Taken mostly as salary (Tax deductible so smaller CT) and 40% on PAYE.
Thanks

 

[finlamit]

I'm not sure that works. OP is a higher rate tax payer so they would pay 40% income tax to save 19% (10K profit) Corp tax.

Thank you for your response.

So would it be better for me to take it mostly as PAYE, therfore limiting my CT bill and paying 40% PAYE, or taking it all as dividends (So 19% on CT and 33.75% on dividend tax)?

 

[Newchodge]

Thank you for your response.

So would it be better for me to take it mostly as PAYE, therfore limiting my CT bill and paying 40% PAYE, or taking it all as dividends (So 19% on CT and 33.75% on dividend tax)?

IF your profit stays at 10K you would be better taking £1,000 as dividend (no tax) and £9,000 as PAYE. 40% tax less 19% savung = tax rate of 21% on £9,000.

However, nexyt year I think the dividend allowance drops to £500. If you go over £9,096 PAYE (this year) you start paying employer's NI @ 13.8% as well.

Can you pay a family member to work in your business?

You really ought to see an accountant.

 

[MyAccountantOnline]

Do you actually want to take out all of the profits?

A company pension contribution is another option.

Maybe a tax free dividend and a pension contribution?

 

[finlamit]

Do you actually want to take out all of the profits?

A company pension contribution is another option.

Maybe a tax free dividend and a pension contribution?

That is something I have not considered, thanks for bringing to my attention. The service I provide doesn't require a large amount (if any) of cash in the bank. So thought might as well take as much of the profits as I can.