Some n00b questions I need answered on running my one man limited company -salary etc

[Jeystone]

First, a preemptive thank you. OK I need some very simple and straight forward advice.

I formed by business Feb 2011 and started trading. It is a limited company, I am sole director.

I basically provide contractor services to video production companies, graphic design etc..I usually get paid a day rate, sometimes through a recruitment agency, sometimes directly from the company. And a few one on one projects with clients..

I estimate my annual earnings will be under £35k.

Once I submit my self assessment and corporation tax forms to HMRC, how long do I have before paying them the tax owed? Can I delay the process by asking for recalculations. Can I pay them in installments, like a direct debit? and where do I pay them..

Also what is the best structure to take wages..I heard I get the first £8000 tax free as I am a new ltd, and someone said I should take minimum wage monthly and then the rest in dividends.

[SallyPlanIT]

First, a preemptive thank you. OK I need some very simple and straight forward advice.

I formed by business Feb 2011 and started trading. It is a limited company, I am sole director.

I basically provide contractor services to video production companies, graphic design etc..I usually get paid a day rate, sometimes through a recruitment agency, sometimes directly from the company. And a few one on one projects with clients..

I estimate my annual earnings will be under £35k.

Once I submit my self assessment and corporation tax forms to HMRC, how long do I have before paying them the tax owed? Can I delay the process by asking for recalculations. Can I pay them in installments, like a direct debit? and where do I pay them..

Also what is the best structure to take wages..I heard I get the first £8000 tax free as I am a new ltd, and someone said I should take minimum wage monthly and then the rest in dividends.

Hello Jeystone

It is usual for a director of a limited company providing services such as you are, to structure the company to pay a low salary (depending on what you have already earned through PAYE in this tax year since 6th April) and pay the rest of the money out as dividends.

Using the above combination, you can earn (2011-12) £42,475 and pay no personal tax or national insurance as the company will pay 20% corporation tax on its profits, payable in one lump sum 9 months after the company year end.
This is based on your contract work falling outside of the IR35 legislation.

You would need to file a self-assessment tax return by January 31st 2012 as you have been a director in this current year. Providing your turnover falls below the estimated £35,000 then you would not have any personal tax liability.

Regards
Sally

[Craig@Clarity]

Personal tax is payable by 31 January following the end of the tax year. The self assessment tax return must also be filed at HMRC by 31 January.

Normally corporation tax is payable by the company 9 months and 1 day after your company's financial year end. Being the first year of trading, your corporation tax is due 21 months and 1 day from the date of incorporation.

If you want to postpone any payments of tax, you'll need to contact HMRC and suggest a payment plan. Here's a link HM Revenue & Customs: Problems paying HMRC: advice for businesses, individuals and tax agents

There's varying opinions and advice on what levels of salary to have from your company. If you wanted a level of salary where there is no tax or NIC, the amount is £7,072 p.a. Assuming you're outside of IR35, your income could be made up of a combination of salary + dividends.

[Jeystone]

thanks, yeah this seems to be the way forward

so basically I will have around 9 months from Jan 2012, to pay any tax owed? Also is there no way to pay in segments? does it always have to be one lump sum?

[Jeystone]

Personal tax is payable by 31 January following the end of the tax year. The self assessment tax return must also be filed at HMRC by 31 January.

Normally corporation tax is payable by the company 9 months and 1 day after your company's financial year end. Being the first year of trading, your corporation tax is due 21 months and 1 day from the date of incorporation.

What exactly would I put in this self assessment form? my monthly salary from the company?

[Craig@Clarity]

What exactly would I put in this self assessment form? my monthly salary from the company?

Personal income e.g. salary, dividends, capital gains, rental income etc.