We have a buy to let ltd company generating around £20000 profit per year. Is it possible to pay ourselves through Paye just under the £20000 to reduce the corporation tax and also use up the majority of our tax free allowance? I know if I take it as dividends then that wouldn't reduce the profit but was unsure on paye?
many thanks for your advice
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Replies (24)
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Can I stay in one of your properties for nothing for a month? Thought not.
Dont ask for free advice, pay a professional to help you.
If your understanding of tax is so limited, I do wonder if you are running your business tax efficiently currently.
If you have £20,000 pa spare, you would be very well advised to engage an accountant.
You’ll find one here:
https://www.icaew.com/about-icaew/find-a-chartered-accountant
Other professional bodies are available.
Yes… but. Why is this property in a limited company ? It sounds like you don’t really understand how corporation tax and income tax work. What have you done until now ? There is a lot of information we can’t know - & you don’t want to put on a public forum – that may be relevant. You could do with proper financial and tax advice it seems to me. While I understand you may not think that very helpful, you are likely in the situation where you don’t know what you don’t know.
You could probably do as you note, but the key question to me is why the property is in the company in the first place.
That seems a very odd decision.
I seem to detect signs of (a no doubt long departed) MDTP having acted as adviser ... which, combined with the looseness of phrases like "no real income ", means that it's definitely time to get a professional involved.
We don't know how long the current situation has been running, but errors (some irreversible but all open to amelioration) multiply quickly with the passing of years.
This was your finest hour Winnie. A direct correct answer to a direct question, with no cluttering unasked advice
Thank you. It’s actually nice to get a direct answer without all the backhanded snide comments. I admit though i was trying to get a bit of free information but only merely because my accountant doesn’t work Saturdays. All these other comments assuming this and that make me laugh.
It was only a direct answer because the question was phrased as "is it possible ..?"
The answer to such a question will always be Yes - unless it necessitates breaking the laws of physics.
However the context of your specific situation will affect whether the possibility is sensible let alone desirable ... or just another foolhardy option, like jumping off a moving bus ('because you can').
BTW I can do patronising as well. "Free information" is valueless information, if only because you didn't invest anything (effort or money) in acquiring it.
When the OP doesn’t know the right question.
Is it possible I can cut my big toe off.
Yes
Should I cut my big toe off and? Why?
No because it will hurt, you may bleed to death, if not it will badly affect your balance etc etc.
Now who is laughing.
OP sack your Accountant. He is doing you a disservice!
I admit though i was trying to get a bit of free information but only merely because my accountant doesn’t work Saturdays.
Why?
This is hardly a desperately urgent question. You could send your accountant an email on Saturday and they will answer it next week. With the added advantage that it will take into account everything else they know about your accounts and tax affairs.
Asking a bunch of randoms on the internet only makes sense if that accountant doesn't exist.
… my accountant doesn’t work Saturdays. All these other comments assuming this and that make me laugh.
I think most of us are laughing at the idea you are paying an accountant who has never thought to suggest paying a salary.
Why are everyone so rude on this site? It’s quite funny really. I’ve had salaries from other businesses that I have now sold. My buy to let company has been running alongside these for years and I’ve never needed to take a penny out. But now I thought it may be more tax efficient to use my personal allowance up through paye. Was going to ask my accountant this week but thought I’d ask this helpful group first, big mistake lol.
You'd prefer to have some anonymous person on a public forum tell you to "go for it" (even if that ends up costing you £,00s in extra tax - which is always possible as we don't know the full details of the company or of you or your brother's situation ... and you don't know who's replying)?
You'd have no comeback in that situation ... whereas your appointed accountant should know your situation / be competent to give you appropriate advice / be covered by professional insurance if the advice is negligent.
If you had an appointment on Monday with your medical consultant, would you spend the weekend asking random 'helpful people' in the pub round the corner from the hospital (who therefore *might* be medically qualified) for diagnosis and efficacious treatment?
Take advice from a professional trading accountant that is regulated and insured.
You really should have done that before setting up the company.
Like a building on fire, plan the exit before entering.
Your company gets no CGT allowances. The two humans involved do, every year. So could their wives.
Retired but no pension yet? Will current advice change when you do start getting a pension?
So much needed to be considered before starting this off, particularly quite clearly predictable changes to circumstances.
As part of planning consider IHT as well
I did respond yesterday but it's lost in the ether of 'review' (due to an amended spelling).
However, you have asked the question: "CAN we offset directors salary against profit?
Winnie answered *that* relatively simple question.
Realistically, your question would more correctly be: "SHOULD we offset directors salary against profit?"
It is the answer to the second question that matters! And nobody here can answer that. The first question is actually pretty meaningless.
Wait and speak to your accountant - that is why you have one. They'll likely give you answers with a level of immediacy. Whatever you do, don't say you've already been given advice on an internet forum... neither your accountant, your plumber, or your dentist will thank you, reduce their fee, or even accept advice you've been given by a bunch of faceless randoms. You never know, your accountant may even be one of us numpties!
I was wondering how much work you did to earn this £20,000. Would you pay an outsider £20,000 to manage this property for you ? I'm guessing no.
If not, it could (but probably won't, because HMRC don't have the staff levels these days) be challenged as "not for the purposes of the trade".
As to whether it's advisable, maybe, or maybe not. There's not enough information to say.
I was wondering how much work you did to earn this £20,000. Would you pay an outsider £20,000 to manage this property for you ? I'm guessing no.
If not, it could (but probably won't, because HMRC don't have the staff levels these days) be challenged as "not for the purposes of the trade".
As to whether it's advisable, maybe, or maybe not. There's not enough information to say.
10k each for duties of a Director? sounds fine to me
We all of course know that for a two bit limited company with hee haw for the directors to actually do that £10k is overkill.
When I retire I suspect I will carry on with non exec roles with two or three companies, but in my case I will actually do something , attend possibly 5-6 board meetings a year and help steer/oversee business strategy, even then I expect, at best, I will get at most about £5k pa per entity.
You are obviously not stupid enough to base what you do on the answers you get.
So was your OP just for the laugh?
"All these other comments assuming this and that make me laugh."