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Most Tax efficient way to taking profits

I am employed but also own 2 ltd companies. How can I be tax efficient

Hi All, 

I am employed as a railway engineer and earn approx. £55k and a high rate tax payer. 

I have recently set up two limited companies; me being the only director and shareholder. Each company has purchased a property and the properties are rented out to the council. So the only revenue received is rental income from the assets.

I have put director’s loans into both companies to pay for the deposits. Company 1 loan was £55k and company 2 was £120k 

After expenses ect.... company 1 will make a yearend profit of around £5k and the company 2 around  £8k. Year end is in July. 

I am not paying my directors loan back to myself yet; so if I was to start paying this back to myself the company profits would drop. Shall I wait until I sell the properties (many year in the future) to pay this back or start paying it back now in instalments? What the most tax efficient?   

I was planning on issuing all of these profits as dividends; then I presume I would have to pay the higher rate dividend tax on these when I put in my directors self-assessment.     

Is this the best way to removing my profits? This is my first limited companies so any advice would be great. 

Thank You 

 

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By Matrix
25th Feb 2018 16:21

It would have been prudent to engage an accountant before carrying out these transactions, so, if you don't already have one, then engage one before the end of the tax year so they can provide bespoke advice on your specific circumstances.

You are not compelled to remove the profits, maybe just take a dividend up to the dividend allowance. Or combine this with a salary next year when this drops.

The timing of the repayment of the Director loan has no impact on profits or tax, only on cash.

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25th Feb 2018 16:39

tobygray123 wrote:

I am not paying my directors loan back to myself yet; so if I was to start paying this back to myself the company profits would drop.

Closing my eyes now. Can't watch any more...

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25th Feb 2018 17:22

The most tax efficient way is to engage an accountant.

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25th Feb 2018 17:24

A fool and his money are soon parted.
What is it that prevented you from seeking advice BEFORE you embarked on this?

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25th Feb 2018 18:05

"I am not paying my directors loan back to myself yet; so if I was to start paying this back to myself the company profits would drop. "

No, no, no, no, no, no.

See an accountant now before you do any more damage.

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By DJKL
25th Feb 2018 19:30

I wonder if the quoted profits are the real profits, if repaying director's loans is assumed to reduce profits I wonder how repaying banks has been treated to arrive at the £5k and £8k figures in the OP.

Seeking out an accountant would certainly be the correct thing to do.

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25th Feb 2018 19:32

OP, do you realise only the loan interest is an allowable expense, not the entire loan repayment?

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to Ken Howard
26th Feb 2018 10:00

Trouble is, Ken, he probaby booked the initial loan as 'sales'. Only fair that the repayment is an expense.

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25th Feb 2018 23:30

From what you have said, (original poster) you are well out of your depth. As has already been stated, it is not just the case that you are misunderstanding one aspect - you are wrong on pretty much everything you say in your question.

Get an accountant, before you do some very costly damage, is the best advice anyone can possibly give you here.

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26th Feb 2018 05:37

Hi there,

Sorry if I seem like I'm jumping on the wagon, but it's another vote for seeing an accountant.

For the small fee it may cost you, it'll be so worth it in the long run.

A lot of firms (including ours offer free consultations).

Best of luck.

John

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to John Charman
26th Feb 2018 08:32

John Charman wrote:

Hi there,

Sorry if I seem like I'm jumping on the wagon, but it's another vote for seeing an accountant.

For the small fee it may cost you, it'll be so worth it in the long run.

A lot of firms (including ours offer free consultations).

Best of luck.

John

Shameless plug?!

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to atleastisoundknowledgable...
26th Feb 2018 10:09

atleastisoundknowledgable... wrote:

John Charman wrote:

Hi there,

Sorry if I seem like I'm jumping on the wagon, but it's another vote for seeing an accountant.

For the small fee it may cost you, it'll be so worth it in the long run.

A lot of firms (including ours offer free consultations).

Best of luck.

John

Shameless plug?!

NO, no no of course not...a TOTALLY shameless plug!

Thanks (1)
to John Charman
26th Feb 2018 09:59

Not sure I could trust a firm that uses brackets in a slipshod manner ;)

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26th Feb 2018 10:13

As I'm not an accountant I don't have any motive for promoting the services of one.

Get an accountant now. Your question indicates that you are way out of your depth and making mistakes that could be very expensive.

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