Moving from Limited to Umbrella (Tax/Dividends Question)

[jmo21]

I will have corporation tax to pay as part of closing my company down/company year end I suspect, I've already set aside money for all company related taxes though.

You suspect you do AND you have set aside money for it?

I hope your planning is less woolly than you post.

[Craig at Nixon Williams]

If you take a dividend up to higher rate tax threshold after 6th April, as soon as you earn anything through an umbrella you will create a tax liability on the dividends declared (dividends form your 'top slice' of income, in the majority of cases).

You will need to do a self-assessment return for 2013/14 if you are a director at any point during that year, there may however be other reasons that you need to complete a return in future years depending on how you income is made up.

Your accountant should be able to tell you how much you have available to take out of the company at any point, this is part of what you are paying them for! If you are intent on closing your company, and never return to trading as a limited company then there are moe tax efficient ways to get surplus funds from the company than by way of dividend, you may want to discuss these with your accountant...

Hope this helps!

Craig

[peteski22]

You suspect you do AND you have set aside money for it?

I hope your planning is less woolly than you post.

Apologies, I meant that I will have to pay it, but I wasn't sure whether it would be when the company closed or when the company year end came (if the closure was in progress).

:P

[peteski22]

If you take a dividend up to higher rate tax threshold after 6th April, as soon as you earn anything through an umbrella you will create a tax liability on the dividends declared (dividends form your 'top slice' of income, in the majority of cases).

You will need to do a self-assessment return for 2013/14 if you are a director at any point during that year, there may however be other reasons that you need to complete a return in future years depending on how you income is made up.

Your accountant should be able to tell you how much you have available to take out of the company at any point, this is part of what you are paying them for! If you are intent on closing your company, and never return to trading as a limited company then there are moe tax efficient ways to get surplus funds from the company than by way of dividend, you may want to discuss these with your accountant...

Hope this helps!

Craig

Thanks Craig, yeah probably best having the discussion with the accountant - I only posted on here in case anyone had some experience in a similar situation and could give some helpful advice on what to be asking/doing. I'd not blast on ahead without speaking to the professionals.


Cheers

[Wanderer]

I think your main problem was that you didn't have a very good accountant; if you decide to stay Ltd I would suggest you get in touch with one of the specialist contractor accountancy firms

Lisa has hit the nail on the head there! With a decent accountant, there should never be any doubt as to how much money you can draw from your company. If you are not in that position as a company director then you need to have a long talk with your accountant and tell them that you want a system whereby you can see where you stand on a daily basis. If they can't do that then there are lots of other accounts who can.

Oooh, look here's one now.

If you take a dividend up to higher rate tax threshold after 6th April, as soon as you earn anything through an umbrella you will create a tax liability on the dividends declared (dividends form your 'top slice' of income, in the majority of cases).

Like Craig says, if you max out your dividends on 6th April then you will probably get caned for 40% tax + employee's NI plus employer's NI when you switch to umbrella leaving you with a net take home pay of <50% of your gross contract value or alternatively, a huge tax bill when you do your self assessment so don't come crying to us when that happens.

[peteski22]

Lisa has hit the nail on the head there! With a decent accountant, there should never be any doubt as to how much money you can draw from your company. If you are not in that position as a company director then you need to have a long talk with your accountant and tell them that you want a system whereby you can see where you stand on a daily basis. If they can't do that then there are lots of other accounts who can.

Oooh, look here's one now.



Like Craig says, if you max out your dividends on 6th April then you will probably get caned for 40% tax + employee's NI plus employer's NI when you switch to umbrella leaving you with a net take home pay of <50% of your gross contract value or alternatively, a huge tax bill when you do your self assessment so don't come crying to us when that happens.

Roger that.. Thanks for all the replies, I'm off to get some information from said accountant.