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Where Taxpayers and Advisers Meet

Limited Company v income tax

Smav
Posts:2
Joined:Thu Apr 06, 2017 11:19 am
Limited Company v income tax

Postby Smav » Thu Apr 06, 2017 12:11 pm

Apologies for asking what many of you will deem an obvious question but I have the following scenario.

I am a full time employee but have the opportunity of obtaining a few commissions from an external party. These could range from £30,000-£180,000 and I need to decide whether I set up a Limited Company to undertake the contracts or to just simply declare it as additional income on my self assessment.

The self assessment method is the most straight forward as I simply pay 40% (higher tax rate already as annual salary is £50,000). However, if I set up a Limited Company I think I only pay CGT and then would pay a further 8% on shareholders dividends upto £30,000 per annum?

If my assumptions above are correct I was hoping someone's could steer me on the following:
- do you pay CGT each year, i.e. Would I pay cut on retained profits. If not I could simply take out £30,000 pa for annum and pay the 8%. Obviously I will have to pay CGT in the year the monies earned.
- can I mitigate some of the CGT by purchasing a work vehicle from the profits.

Apologies if these are obvious questions, I've tried to do the groundwork myself but it isn't straightforward to me!

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Limited Company v income tax

Postby SteLacca » Thu Apr 06, 2017 1:05 pm

It's not CGT, it's Corporation Tax (CT). Whilst purchasing a vehicle via a company may mitigate CT, you will probably find that the income tax consequences outweigh the perceived benefit.

More information is needed for effective planning, but at that level of additional income you would certainly benefit from speaking to an accountant rather than trying to do it on a forum. There are pitfalls to be avoided and numbers to be crunched.

Smav
Posts:2
Joined:Thu Apr 06, 2017 11:19 am

Re: Limited Company v income tax

Postby Smav » Sat Apr 08, 2017 7:34 pm

Thanks for the assistance. Sounds like professional guidance will be money well spent.


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