Wondering if I can claim tax credits after poor year

[dawn123]

Hello

Apologies if this is in the wrong area.

Myself and my husband have a limited company from which we draw the up to tax threshold as wages.

We draw money from the company bank account on a monthly basis also. This is a set amount regardless of how much profit has been made per accounting year.

Unfortunately last year we only just broke even, and were living off the profits (cash at bank) from the previous year.

My question is this: Does the lack of profit mean we may be able to claim tax credits? I have always assumed not, as our bank accounts show that we are 'earning' more.

Thanks in advance

 

[UKSBD]

Tax credits are based on your income not the Companies.

If you are both earning the tax threshold you won't be eligible for tax credits.

If you have children you may be eligible for Child Tax Credits

 

[Mr D]

If your circumstances are such that now you are not earning much then can be worth applying.

https://www.gov.uk/working-tax-credit/eligibility

 

[webgeek]

Look at info on carrying losses forward such as:
http://www.litrg.org.uk/tax-guides/...ses-and-capital-allowance/what-if-i-make-loss

What can I do with my loss?
Just to remind you – when we refer to a tax year we are talking about the year ended on 5 April – so 2015/16 is the tax year ended 5 April 2016.

There are a number of ways in which a loss can be used to reduce taxable income in a tax year and so reduce the associated tax bill for the tax year.

1. You can use the loss in the current tax year and set it against all of your other income including income from savings. This reduces the tax that would otherwise be payable on your other income.
2. You can carry the loss back to the previous tax year and set it against all of your income including income from savings. This reduces the tax due on this income, and a repayment of tax is usually generated.
3. For a new business, if the loss occurs in any of the first four years of trading you can set it against your total income of the three tax years immediately before the loss year, starting with the income of the earliest year first.
4. If you cannot use the loss in any other way, you can carry it forward and set it against profits of the same trade in a future year.
5. If your business finishes and you make a loss in your last year, you can set this against your trading profits of the previous three years, latest year first.

Also on:
https://www.mygov.scot/accounts-tax-returns-companies/prepare-a-company-tax-return/

If you made a loss
A loss will reduce your Corporation Tax bill. If you've made losses that you can't claim back in one tax return because they're too large, you can either claim the loss:

• against your previous year's profit ('carry it back') - you may get a repayment of Corporation Tax if you do this
• in future financial years ('carry it forward')

 

[STDFR33]

We draw money from the company bank account on a monthly basis also. This is a set amount regardless of how much profit has been made per accounting year.

This isn't a good idea. Read the insolvency section of the forum for more info

 

[webgeek]

pay a wage at a relatively low rate then claim the rest as director dividend.

that paying yourself monthly regardless of profit and loss can get you in hot water if you go negative for the year. works great if you're profitable.

 

[MyAccountantOnline]

pay a wage at a relatively low rate then claim the rest as director dividend.

that paying yourself monthly regardless of profit and loss can get you in hot water if you go negative for the year. works great if you're profitable.

You need to be really careful paying dividends though bearing in mind they can only be paid from after tax profits.