A Limited Company is a legal entity in its own right that is owned by a shareholder(s) and ran by a director(s). Because it is a legal entity in its own right the shareholder(s) enjoys limited liability which generally means they are not liable for liabilities of the company. A limited company must have at least one shareholder and one director. The company shareholder(s) can also be the director(s).

Companies currently pay corporation tax on taxable profits at 20% (taxable profits up to £300,000). The company can pay out distributable profits as dividends (currently free from National Insurance) which are subject to income tax on the shareholder(s).

The shareholder(s) is only taxed on dividends paid by the company therefore leaving an option to retain profits in the company, which can then be distributed later as capital and currently subject to tax at just 10%

Trading via your own company means your spouse could subscribe for shares in the company. In addition a non-earning spouse could receive a salary in order to utilise their tax-free personal allowance. As a shareholder dividends can then be paid to the non-earning spouse to utilise their basic rate tax band potentially saving £000’s in tax and National Insurance.

Tax savings could be further maximised if current total income exceeds £100,000 due to implementation of a new legislation that withdraws your personal allowances for income between £100,000 and £118,880.

We do all the work for you, from setting up the limited company, dealing with the company’s annual reporting obligations to Companies House, dealing with HMRC regarding all company matters, appointing directors, issuing shares, preparing board minutes and dividend vouchers and dealing with the monthly company payroll.

Tax savings are possible no matter what your circumstances, contact us now to find out how much you could save: jason@doctorstax.co.uk


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