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Where Taxpayers and Advisers Meet

Am I doing things right?

MJ-Advice
Posts:1
Joined:Mon Oct 07, 2019 4:15 pm
Am I doing things right?

Postby MJ-Advice » Mon Oct 07, 2019 4:24 pm

Hey guys,

Here’s my current situation.

I started working for my dads business in April and I really want some advice to prevent myself from paying more tax than required.

• I have a company car the business pays to lease (Seat Arona 2019). No personal mileage, just business.
• I earn £32k salary per year
• Business wants to pay me between £2-4k bonus in my October payslip

In a few months time,I will become a shareholder in the business. What is the best idea for me? Should I delay this bonus until I become a shareholder? I don’t want to get stung with a hefty tax bill.

Any advice would be truly appreciated, and if I can provide anymore details please just ask.

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Am I doing things right?

Postby AnthonyR » Wed Oct 09, 2019 4:38 pm

Couple of points.

1. You say that there's no personal mileage on the car. This is often quite difficult to achieve in practice. Does the car stay at the office and you only use it to drive to meetings? Commuting to and from work is not business mileage in the eyes of HMRC. Neither is popping to the shops on your lunch break.

2. Nowadays overall there's not a huge difference in taxation between a shareholder being paid dividends or a salary when you take into account corporation tax and then dividend tax. However, if your 'bonus' doesn't take into account corporation tax and as will benefit from the dividend allowance the first £2,000 will be tax free and this may make a positive difference .

3. Your father should take advice when transferring shares to you as there are tax consequences (capital gains tax in particular).

All of this should probably be discussed with the company accountant before taking any steps though.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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