Save Tax and National Insurance with your limited company
It is possible to reduce your (UK) personal tax and national insurance by running your business via a limited company. The amount you can save will depend upon several factors:
- The company’s profitability
- Your personal circumstances
- The amount of funds you need to withdraw from the business
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How to register your new PAYE scheme
This article presumes that you need to register a scheme and gives easy to follow instructions on how to register your new scheme with HMRC.
A new scheme can be registered either online at www.hmrc.gov.uk , by telephone ( 0845 60 70 143) or in writing. Once your scheme is registered you will receive notification of your new scheme in writing and it will be given two reference numbers.
PAYE scheme reference: This is the PAYE office reference and is used for day to day administration and enquiries regarding tax codes etc
Accounts office reference: This is the reference to be used when making payments or making any enquiries regarding your PAYE account with HMRC.
If you would like HRBS to register and deal with your PAYE scheme on your behalf, please contact us for a FREE, no obligation quotation.
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Cut red tape … get a P11d dispensation
For those of you who are one-person limited companies and/or have employees, you may be aware that reimbursements of expenses (excluding mileage within approved rates) should be reported to the Inland Revenue on P9d or P11d and included within the claimant’s tax return. This can add quite a burden onto the company’s administration and also incur fines if returns are not completed correctly or submitted late.
However, there is an easy way to reduce this administrative burden - apply for an expense dispensation.
Depending upon the type of business, various business expenditure can be included within the dispensation and may remove the need to complete p9d/p11d for some employees (car, fuel, health insurance etc benefits must still be reported).
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A quick guide for your new limited company
Getting at your profits
Extracting your profits from your company can be by a mix of wage (ie under PAYE) and dividend. In order to pay a dividend the company must have sufficient after tax profits. ie for a £10k dividend to be paid the company must have approx £12.7k pre tax profits (corp tax rate of 21%).
Do not be tempted to withdraw more than is legally available as dividend, as it would be “illegal” and HMRC may class it as a salary or a loan to the director (taxable benefit in kind if over £5k) and charge tax & NIC.
For more on how to extract your profits in a tax efficient way, read our article “Save tax and National Insurance with your limited company”.
