Running Your Limited Company

At the outset you need to understand that your Limited Company is a separate legal entity from you as the director and shareholder. As a director you will become an employee of the company and will be responsible for managing the company’s affairs. In this capacity as an employee you can receive a salary at a level that you decide.

As the owner (shareholder) of the company you are also entitled to receive a return on your investment. This will be in the form of dividend income from the company’s taxed profits. The frequency and level of dividend income is decided by you as company director based on the available profits of the company.

All of the cash held in the company bank account legally belongs to the company and the company’s finances are separate to your own.

You can extract funds from the company through a combination of the following:-

• Salary

• Dividends

• Expenses – you can reclaim any allowable business expenses paid for from personal funds

The company has to pay Corporation Tax on its profits, where profit is calculated as sales less allowable business expenses incurred. Since dividends are paid out of taxed profits they do not reduce the company’s corporation tax bill.

Your Contractor Accountant can advise you on the expenses that are allowable through the Company and can assist you with tax planning opportunities.

Your company may need to account for VAT or may benefit from registering voluntarily. Call your OrangeGenie Contractor Accountant on 0845 055 7055 to discuss this opportunity.

As a director of a limited company you are obliged to complete a Self-Assessment Tax Return each year. This will record the income you have extracted from the company. The level of personal tax that you will need to pay will be dependent on the level of salary and dividends you choose to pay.