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Personal Tax Guidelines

A key benefit of running a limited company is the ability to tailor remuneration packages to suit personal needs, while remaining tax efficient.

A remuneration package would usually consist of:

• Salary

• Out-of-pocket expense reimbursements

• Dividends

• Pension contributions


Salary

The level of salary is the director’s choice and can be affected by other earnings, national insurance contributions record and rewards required from running the company.


Expense reimbursements

Allowable business expenses paid out-of-pocket by employees may be reimbursed without the employee incurring any additional personal tax liability as a result of the payment.


Dividends

Dividends are paid from the trading profits of a limited company to the shareholders. They are paid from taxed trading profits, however do suffer some personal tax above certain thresholds. These taxes are computed in an annual personal tax return and should be set aside for payment to HMRC.


Your accountant will work with you to advise on the taxation of your income as well as to guide you on taxes that should be set aside for HMRC settlement.


Reporting requirements

Company directors usually have a requirement from HMRC to complete a self-assessment personal tax return annually. This will comprise all income from all sources during the tax year, any tax already paid at source, and any applicable reliefs. The resulting tax liability must be paid to HMRC before the 31st January following the end of the tax year in which it was earned.


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