I'm currently in full time employment and am a basic-rate taxpayer, just... I'm also the director of my own web design business doing most of the work myself but will be having another self employed person doing some work in the future. My question is am I entitled to pay myself expenses such as mileage without being employed by the company. Also I plan to pay myself dividends but no salary is this acceptable and as I'm a basic-rate taxpayer would this mean that I do not need to pay tax on the dividends. I'm expecting annual dividends to be under £2000 as it's a very small company at present.
Hope someone can help with this
Thanks
Replies (6)
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Yes you can claim reimbursement from the company for expenses you incur personally on behalf of the company.
Yes there will be no tax liability on dividends that, when grossed up, come within your basic rate band.
Question.
Sorry to jump on your stream.. I thought dividends paid under £32,010 per annum get taxed at 10%. http://www.hmrc.gov.uk/taxon/uk.htm
Ps: This tread perfectly describes my situation! If I were in future to take small salary from small second limited company I have read £641 per month is the maximum before having to run a PAYE scheme and pay NIC, is this true?
Probably just stick to dividends as an extra £7692 salary will push me into higher tax bracket..
£641 is the maximum you can
£641 is the maximum you can pay yourself before paying NICs, but you would need a PAYE scheme at this level as earnings will be above the Lower Earnings Limit. As I understand it you can only avoid a PAYE scheme if ALL employees are paid less than the LEL, but if one is paid more you need to have everyone included in the PAYE scheme
10%
Yes the gross value of the dividend (including the 10% tax credit) is then taxed at 10% less the 10% tax credit = no extra tax to pay at the income level you describe.
Yes.. sort of.
If your total taxable income is below the basic rate threshold you will have no additional tax to pay.
A dividend carries a notional tax credit. If your company declares a dividend of £9 per share, and you have 100 shares, you will get £900. Your tax return you will show gross dividend £1000, tax credit £100 (10%), net dividend £900.