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!
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