Tax advice: If I form a company, can I still earn £10,600 tax free?

[kellu]

Hi all,

I am earning some affiliate commissions from a Thailand based company for the next 3 years, which is not much and well under the tax free allowance of £10,600. However, now this company has informed me that they need to start paying local witholding tax on my income because I'm an individual so it's considered an employment payment.

They told me I need a legit company name, so I can invoice them for a service instead, to avoid paying this tax to the Thai government.

I've been living in the UK for the last 4 years and remember reading that setting up a UK company is very easy and trouble free.

My question is: if I form an UK company that makes under £10,600 per year revenue and pays 100% of the revenue for costs and my personal salary (making 0% profit), will my earnings remain tax free under the allowance, or do I have to pay corporate tax?

Will there be any other costs?

Thanks in advance.

 

[Scalloway]

If your company pays you a salary of £10,600 and you have no other taxable income you will not pay tax on it and the company can deduct that sum from its taxable profit.

 

[TODonnell]

I'm not an expert but: A human has a tax-free allowance, but a limited company doesn't. So the company pays the human up to his tax-free allowance. Then after that it's up to an accountant and/or current legislation as to what's most tax-efficient.

 

[kellu]

Thanks for the replies guys. Bumping this up a little to see if anyone else can comment on this, as currently the replies say quite different things on this subject.

If your company pays you a salary of £10,600 and you have no other taxable income you will not pay tax on it and the company can deduct that sum from its taxable profit.

Thanks Scalloway - are there other costs for having a UK company name other than the initial start up costs? Does a UK company need to have a company bank account or can I use a normal UK bank account?

I assume I can just register the company to a friends address as my office, as I am no longer living in the UK.

 

[Scalloway]

You need to have a bank account that belongs to the company.

If you are no longer resident in the UK then the tax laws of your residence apply, not necessarily those of the UK so your £10,600 salary might be taxed in your country of residence.

 

[kellu]

You need to have a bank account that belongs to the company.

If you are no longer resident in the UK then the tax laws of your residence apply, not necessarily those of the UK so your £10,600 salary might be taxed in your country of residence.

Thanks for the info. In my case the tax laws are not actually the problem, as I'm resident in Belgium and the earnings from the Thai company are under the allowance.

The reason I want to form a company to have a company name to be able to create company invoices to the Thai company, so that they will not have to pay the "employment benefit tax" they currently have to do (which they would deduct from my commission).

However, forming a company in Belgium is very difficult and costly so it's not a viable option.

 

[fs2000]

You must have a company bank account, you will need to prepare annual accounts which can costs £500plus depending on the accountant you use. Any income in to the company less expenses will attract corporation tax at 20%. If the company pays you a salary it will incur the national insurance. For a small amount of money you will need to work out whether the costs of setting and running a company over the withholding tax in Thailand is worth it.


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