Setting Up a Limited Company to pay lower taxes?

[fodigie]

I am employed as a doctor in the NHS and earning approximately £60k therefore higher rate taxpayer.

I have recently started doing some private work which I would ordinarily include on my Annual Tax Return (and thereby pay tax at the higher rate).

However, I am considering setting up a limited company for this additional income so that I would pay corporation tax at a lower rate.

My questions are:
1. Is this a legitimate way to declare this additional income?
2. Are there any expenses which I can legitimately claim to reduce my profits further eg. travel to and from clients, use of office etc?
3. Can I take money out of the business at any time during the year or only at year end?
4. How are dividends declared and recorded?
5. How will this affect my Annual Tax Return?
6. If I register the company now, can I include income/expenses I have made/incurred over the last 3 months (when additional work started)?

Any helpful comments would be appreciated.
Thank you

[bd6759]

You need to take proper advice. There are many pitfalls and regulatory requirements that you need to comply with.

You cannot route your money through a company to avoid personal tax. The company has to earn the money.

[section 44]

You cannot route your money through a company to avoid personal tax. The company has to earn the money.

Indeed. Even though you might own the company, it is a separate person and it is not merely you or an extension of you.

[strawn]

You'll want to use an accountant who is used to setting up such companies for people like you, and who will (I suggest) do your company tax submission, and perhaps your own. He'll also advise you how to deal with VAT. Now, speaking as an amateur:

1. Is this a legitimate ...: YES.

2. Are there any expenses which I can legitimately claim to reduce my profits further eg. travel to and from clients, use of office etc? I UNDERSTAND that the travel claim will become illegitimate for April '16 onwards, but it's OK in 2015-16. Office etc OK.

3. Can I take money out of the business at any time during the year... YES, as long as you leave enough to cover the tax bill.

4. How are dividends declared and recorded? IF YOU are the sole director/shareholder, I think you just decide and then document the decision. Leave a copy of the record with your accountant.

5. How will this affect my Annual Tax Return? YOU WILL have dividend income to declare.

6. If I register the company now, can I include income/expenses I have made/incurred over the last 3 months (when additional work started)? I BELIEVE so.

If anyone more expert would like to add to this reply, or correct it, please do so.

[bd6759]

You'll want to use an accountant who is used to setting up such companies for people like you, ... Now, speaking as an amateur ...If anyone more expert would like to add to this reply, or correct it, please do so.

There is no correct answer to any of the questions 1 - 4 without knowing the facts.
5 is correct
6 is just plain wrong.