Tax considerations for limited company directors
Tax considerations for limited company directors
Running a limited company can feel daunting. So, we’ve put together this short non-exhaustive ‘checklist’ to give you a few ideas of some of the things to consider.
- Speak to your accountant about your personal situation, e.g. tax free childcare and child benefit, need to account for any student loan repayments if applicable, usefulness of company pension contributions if you are near the age of 55 years old, your monthly personal cash flow requirements, etc.
- Speak to your accountant about setting up your company correctly, e.g. directors, shareholders, etc.
- Speak to your accountant about your VAT liability, e.g. reclaiming VAT on expenses incurred before VAT registration on the flat rate scheme when you submit your first VAT return and planning the purchase of capital assets (computer, phone, table, chair, printer) totalling more than £2,000 on a single receipt in order to reclaim VAT.
- Are you setting aside tax based on the income that you will take from the company if your contract is outside of IR35?
- Have you discussed with your accountant about the possibility of employing a family member to help you with the process of running your limited company, e.g. bookkeeping, looking for contracts, reviewing contracts, updating CV/Linkedin profile, helping you with research, helping you to file away and organise your receipts?
- Have you discussed with your accountant your statutory responsibilities, e.g. taking photos or filing your physical receipts in case of a HMRC investigation, all the tax return submission deadlines to avoid HMRC fines, all the tax payment deadlines to avoid HMRC fines, latest tax cases, etc?
- Have you discussed with your accountant the benefits of the flat rate scheme for VAT versus the standard scheme for VAT? Which scheme is better for you?
- Have you discussed with your accountant the possibility of a 10% Business Asset Disposal Relief claim when you close the company and how to qualify for the 10% Business Asset Disposal Relief?
- Are you aware of the rules around IR35, and the rules around claiming travel and subsistence?
- Has your accountant made you aware of the expenses that you can claim via a limited company, e.g. cycle to work scheme, pension contributions, relevant life cover, use of home as an office charge, Christmas party, trivial gift benefits, staff training, pre-trading expenses, etc.
- Are you aware of the rules around taking a director’s loan, making pension contributions, investing in EIS, VCT, or SEIS shares?
- Do you understand how salary, interest, rent and dividends are taxed personally, and how the personal tax payments vary depending on whether or not you receive child benefit and/or whether or not you go above the £100k threshold for gross personal income?
- Are tax estimates for corporation tax, VAT, PAYE and income tax all visible within your online portal and are these correct and up to date? Has your accountant conducted a health check of your online portal yet to ensure that you are recording all your business expenses?
- Has your accountant confirmed that there are no additional charges for personal tax return(s), £34 confirmation statement, and references for income/employment/mortgage verification purposes, etc.
- If you pay yourself dividends, do you have dividend vouchers and minutes for your dividend payments and understand how to pay yourself dividends taking into account profit, corporation tax, distributable reserves and company shareholdings?
- Has your accountant confirmed that they have registered your company for all the taxes?
- Has your accountant confirmed that you are using a professional 3rd party online accounting system that can be moved around from accountant to accountant? This could potentially save a lot of headache down the line should you wish to change accountants in the future?
- Does the income that you are withdrawing from the company match your self assessment and PAYE records as per your online HMRC personal tax account?
- If you get paid and spend in a foreign currency, can you save on bank charges and fees?
And, don’t forget that at AR Tax Accountants we are here to discuss a wide variety of business and tax considerations that you may have as a limited company director, whether a freelancer or property investor, that are specific and bespoke to your needs, just head over to our contact page to get in touch with us.
