How to arrange pay and tax for small business

[spiderplant0]

I have just started a business and have been reading up on how to file returns, how to pay myself and how to pay tax and NI etc and I am getting very confused about all the options. I wonder could someone help narrow down what I have to read by suggesting the likely options.

My situation is ...
Me and a partner have a limited liability partnership
Doing web design.
The amount of money we receive will not be 50:50 but will depend on individual jobs.
There will be almost no expenses (working from home etc).
Sales will be quite low initially (< £50K).
I will be doing it full time and my business partner will be part time (he has other employment).

 

[Scalloway]

If you are partners in an LLP you are effectively self employed and responsible for your own tax and NI. More information here

https://www.gov.uk/business-legal-structures/limited-partnership-and-limited-liability-partnership

 

[RTI-man]

All the following may be rubbish as its not my area of expertise but my basic understanding of a company is:

The company will be liable for Corporation Tax on any profits, then the Directors split the profit accordingly and pay their own tax on that...
http://www.hmrc.gov.uk/sa/parts-partners.htm

There's a load of threads that I've seen on here about paying a wage to Directors, by keeping the annual amount below the Secondary NI Threshold then no NI is payable, but the credit for benefits are still earned. Tax however is a different matter especially for your partner for whom this is a 2nd employment and therefore would likely be taxed on Basic Rate (which would happen through SA anyway).

You will however have to submit a PAYE RTI return (and therefore register for PAYE) for any wages paid if either of you earn over the LEL. You can however reduce the work and worry by operating a Directors Loan Account (http://www.hmrc.gov.uk/ct/managing/director-loan.htm)

There are many people on here with way more knowledge on these things than me who will no doubt be able to fill in the blanks and provide far more info on the basic overview I've given.

 

[Scalloway]

LLPs do not pay Corporation Tax

http://www.hmrc.gov.uk/manuals/bimmanual/bim72115.htm

the LLP will normally be regarded as transparent for tax purposes and each member will be assessed to tax on their share of the LLP's income or gains as if they were members of a general partnership governed by the Partnership Act 1890.

 

[RTI-man]

Told you it was likely to be rubbish

 

[spiderplant0]

Hi, thanks for the replys.

I've been reading the 'Which Tax Handbook' and it suggested that there was various ways of taking an income. e.g. take it as dividends or take it as pay etc which may have different tax advantages. For LLP I guess there is a reduced set of choices.

Scalloway, I read the link about LLPs. Is it your understanding that there is not really any choice of how you take out the money? We will just divide up the proceeds as agreed with my partner? And then it just becomes part of our income as far as filling out our personal tax returns.

 

[Scalloway]

Scalloway, I read the link about LLPs. Is it your understanding that there is not really any choice of how you take out the money? We will just divide up the proceeds as agreed with my partner? And then it just becomes part of our income as far as filling out our personal tax returns.

You are correct.

 

[Philip Hoyle]

Not as simple as just putting your drawings on your personal tax return.

The LLP has to prepare formal accounts and file them with Companies House.

The partners are taxed on their profit share as per the LLP tax return, not their drawings.

 

[MyAccountantOnline]

You may find this helpful.