How to take money out of your Limited Company

Following completion of your limited company formation, it is important to realise from the start that the limited company is a separate legal entity to the directors who form it. The monies within the company bank account do not belong to you until they have been withdrawn as salary, dividends or expenses. Genie Accountancy can offer you advice on how to go about this, read below to find out a little more.

Expenses

Any expenses incurred by yourself on behalf of the company should be reclaimed from your company. You will have no tax liability on these reimbursed expenses if they were allowable business expenses.

All reimbursed expenses will need to be reported on your P11d by the company. Any reimbursed expenses that were actually fact Benefits in kind will be also be reported on your P11d and tax return.

Salary

If you are outside of IR35 then generally the most tax efficient method of withdrawing funds is via a combination of salary and dividends. If you are inside IR35 then you will need to withdraw your funds as deemed salary.

Deciding how much Salary to pay if outside IR35:

As the owner of the company the level of salary you choose to pay is your decision. As an office holder of the company you are not bound by the National Minimum wage so you should make your salary decision based on:

  • Your personal requirements and commitments.
  • Your need to ensure you have enough National Insurance Contributions credits to qualify for future access to state pensions and benefits
  • Your view of risk; some commentators believe drawing low salaries may increase your risk of an HMRC investigation

Salary will be paid net of Tax and Employees National Insurance

Dividend

A Dividend is a distribution of a company’s profits after tax and is paid to all company shareholders. Company directors must decide how much of a dividend to distribute, ensuring that they can demonstrate that at the time the company had sufficient retained earnings to pay the dividend.

Dividends should be voted for at a board meeting and recorded in a minute. Dividend vouchers should also be produced on payment. Dividends are paid net of a national 10% tax credit.

Taxation of Dividends

Dividends are paid out of Company profits after Corporation tax has been paid, they do not, therefore, affect the Corporation tax liability.
Dividends will attract a personal tax liability if your total income is in excess of the higher rate tax threshold. For this calculation, you must gross up the Dividends that have been received and determine your overall income.

If you are a basic rate taxpayer no further tax will be payable o the dividend. If you are a higher rate taxpayer dividends will be subject to either an additional 25%/30.56% of the net dividends.

All dividend transfer payments should be kept separate from payments made for wages or expenses so that they are clearly and separately identifiable to HMRC.

If you would like further information on withdrawing funds from your limited company please call our new business team on 01296 468 185 or email 01296 468 185 or email accountancy@orangegenie.com

Why Orange Genie Accountancy?

Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice.

We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email.

Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:

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  • Proactive contact
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  • Annual Return
  • Self-Assessment Return
  • A fully compliant service so you are safe in the knowledge that you are meeting your legal obligations
  • Access to the Freeagent Software, which is updated in real time so you can always see how your business finances are looking

​And much more, includingaccess to wealth management advice, IR35 reviews and pensions planning. 

If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com

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