By PaperRocket Accounting, Dec 7 2017 12:20PM
There are a few different ways to withdraw funds from your limited company, but which is right for you?
• You will most likely be taking the same amount on the same day of each month.
• An RTI submission must be made to HMRC to inform them of the salary being taken.
• If you exceed certain thresholds, you may pay tax and employees national insurance on the amount, which is deducted at source by your company. You will be paid the net amount.
• On top of this, if you exceed the threshold, the company will have to pay employers national insurance to HMRC.
• Monthly or quarterly, the limited company will need to make a payment to HMRC in respect of the tax, employees NI and employers NI.
• The salary is treated as a company expense and the company will receive corporation tax relief on the amount.
• These can taken on random days, and months apart.
• A dividend declaration form should be completed and kept for the company records.
• Any tax due on the dividend will only be payable once the self assessment return for that tax year has been completed and filed.
• Dividends are taken from the company profit after corporation tax. Therefore, a dividend can only be taken provided the company has the profit available to do so.
• If you have paid for any company expenses personally, you are then entitled to reimburse yourself for them.
• This can be done at any time. You can either reimburse yourself after each expense incurred, or alternatively, add a few up and reimburse yourself weekly, monthly, quarterly etc.
• As with any company expense, receipts must be retained.
• There will be no tax implications on this payment as it is simply a reimbursement of an amount you are owed.
• If you only want to temporarily take money out of the company, with the intention of paying it back, you can take a loan.
• As long as the loan is below £10,000, you will not need to repay the amount to the company with any interest.
• If the loan is over £10,000, you will need to repay the amount with at least interest of at least 3% p/a to prevent the loan being treated as a benefit in kind and therefore attracting additional tax/ni.
• As long as the loan is repaid within 9 months of the company year end in which it was taken, there will be no additional corproration tax to pay. For example, if your company year end is 30th September 2017 and you take a loan in July 2017, it would need to be repaid by 30th June 2018.
• If the loan is not repaid within 9 months of the company year end in which it is taken, you will need to pay additional corporation tax to HMRC on the amount at a rate of 32.5% of the loan amount. This will be due with your normal corporation tax payment for that company year. You will then be able to reclaim that additional tax from HMRC once the loan has been repaid, but this can take a long time, so it is generally advised that repayment is made in time to avoid this.
So, as you can see, there are various different ways to withdraw funds from your company. The above gives an overview of these, but it is always a good idea to speak to your accountant to discuss which method(s) will work best for you.
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