Taking money out of a limited company
There are a number of ways a director can extract money from their limited company.
The money can usually be withdrawn in one or more of the following ways. For most directors, the optimum way to minimise personal tax liabilities will be using a combination of these methods.
Salary, expenses
Tax on savings interest
If you have taxable income of less than £17,570 in 2021-22 you will have no tax to pay on interest received. This figure is calculated by adding the £5,000 starting rate limit for savings (where 0% of the interest is taxable) to the current £12,570 personal allowance. However, it is important to
Claims to reduce payments on account
Self-Assessment taxpayers are usually required to pay their Income Tax liabilities in three instalments each year. The first two payments are due on 31 January during the tax year and 31 July following the tax year.
These payments on account are based on 50% each of the previous year’s net Income
5% late penalties apply from 1 April 2021
Self-Assessment taxpayers that failed to pay their outstanding tax liabilities or set up a payment plan by midnight on 1 April 2021 will be charged a 5% late payment penalty charge.
Under the normal rules a 5% late payment penalty would have been charged if tax remained outstanding or a payment
Updating Self-Assessment tax returns
There are special rules to follow if you have submitted a Self-Assessment return and subsequently realise you need to change it. This can happen if for example you made a mistake like entering a number incorrectly or missing information from the return.
If you filed your return online, you could
Rent-a-room relief
The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. The current tax-free threshold of £7,500 per year has been in place since 6 April 2016. If you are using this scheme you should ensure that rents received from lodgers during the current tax
Tax-free property and trading income
Two separate £1,000 tax allowances for property and trading income were introduced in April 2017. If you have both or either type of income highlighted below then you can claim a £1,000 allowance for each.
The £1,000 exemptions from tax apply to:
If you make up to £1,000 from self-employment,
Reminder, what are badges of trade
The ‘badges of trade’ tests whilst not conclusive are used by HMRC to help determine whether an activity is a proper economic trade / business activity or merely a money-making by-product of a hobby.
They are useful when careful consideration needs to be given to deciding whether a hobby has become
Spring Budget 2021 – Income Tax Rates & Allowances
It has been confirmed as part of the Budget announcements that the 2021-22 personal allowance will increase to £12,570 (2020-21: £12,500) and the basic rate limit to £37,700 (2020-21: £37,500). As a result, the higher rate threshold will increase to £50,270 (2020-21: £50,000) from 6 April 2021.
The
Marriage Allowance tax break
If you are entitled to the marriage allowance and have not yet applied, then you could receive a payment of up to £1,188 from HMRC. HMRC used the occasion of Valentine’s Day to remind couples to make a claim.
The marriage allowance is available to qualifying married couples and those in a civil