How does paying dividends reduce my Company’s tax bill?

It doesn’t.  A Company pays Corporation Tax on its profits before dividends are paid out.  Consequently, shareholders are treated as having already paid tax on their dividends (called a ‘tax credit’). A shareholder who is paying Higher Rate Tax will have the dividends...

Changing from a sole trader to a Limited Company

Transferring from a sole-trader or partnership, to a Limited Company is sometimes recommended by accountants for tax planning reasons or to benefit from Limited Liability and they will consider the following issues. When: Work out which side of a tax year end to...

How much can I earn before paying income tax?

Every person who is resident in the UK is given a personal allowance each tax year. It operates as follows: The personal allowance is the amount of income you can receive before paying tax – and it generally increases each tax year.  For the 2019/20 tax year, it is...

Do you need to submit a Tax Return?

You need to submit an Income Tax return if HMRC send you a Tax Return to complete or, if you know that you have income tax or capital gains tax to pay. However, HMRC have a list of further circumstances where a Tax Return should be prepared, including: Your income...

What is s.455 tax on overdrawn Director’s Loan accounts?

This tax is the result of an overdrawn Director’s Loan Account (DLA).  Here is a brief explanation of how they can arise; the implications, and what to do. An overdrawn Director’s Loan Account (DLA) can often arise accidentally when a Director/shareholder takes money...