Are You a Limited company in the UK Heres the Apt Guide for taxation

A limited Company enjoys the benefit of reduced tax liability, but the inflow of income becomes slightly more complicated than being a sole trader.

Tax Liability of a Limited Company

The limited company pays Corporate Tax and not Income tax or National Insurance. The current rate of corporate tax in the United Kingdom is 19 per cent.

Elaborating Corporate Tax payment for Limited Companies

The bright part about corporate tax is that there is no fluctuating tax rate as per the income or profit; it is just straight 19 per cent of the gains that the company needs to pay.

Suppose your limited company made a profit of 120000 Euros in 2019. The total expense is 40000. So, ultimately the net profit becomes 80000 Euros. Now, the corporate tax charged would be straight 19 per cent of 80000 Euros, that is, 15200 Euros. This is how simple and uncomplicated the calculation is.

How does getting paid through a limited company work?

A limited company is an artificial legal entity, which means that it has its own separate identity. In simple words, a limited company is an artificial functioning body, and all the revenue belongs to it. So, being a director of this artificial body, you will need a salary or declare a dividend.

The process to take a salary from a limited company as the director

• Register as an employer with HMRC
• Download HMRC’s Basic PAYE or another HMRC approved option. And set up PAYE (pay as you earn).
• Now, you can transact your salary from the company’s account to your private bank account.
• Once you have completed the transaction, submit it to the HMRC through the app you downloaded before.

Dividend

Shareholders are bodies that own all or part of a company, and the share of the company’s profit paid to them is called the dividend.

Claiming a Dividend:

To process the dividend, you need to:

• Having a clear note of the financial position of the company is the first step. You can take your dividend only after the tax is deducted from the profits. If, after all, expenses, the company still runs in profit called ‘retained profit’, one can claim a dividend.
• Prepare a dividend voucher with the company’s name, the amount of the dividend, and the required name. A professional accountant can help in better reciprocation of the process.
• Now, you can transfer the amount from the company’s account to your personal account.
• The dividend is paid only once or twice in a year as more frequent transactions can grab unwanted attention.

The dividend does not affect your company’s tax position; however, it directly impacts your personal tax liability.

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