Limited company tax – the second thing you need to know….

Author: Russell Smith
September 2, 2015

So yesterday, I blogged about limited company tax but only spoke about the tax that the company tax.

When you become a limited company, the company pays tax at 20% on the profits (incomes less expenses = profit).  However, you may also be in line for some income tax on your personal earnings ie the money you take from the company.

Currently you can take up to £39,206 from your limited company income-tax free (not totally tax free, you’ve already paid 20% corporation tax).  This only works if you have no other income and the best way to do it is pay £10,600 salary and £28,606 dividends.

However, from 6 April 2016, the rules are changing meaning that after you take out your minimum salary, which will now be £11,000, when you then take dividends the first £5,000 is free but the next £32,000 will be taxed at 7.5%.

After this initial £43,000 the tax bill goes up to 32.5%.

However, the good thing about a limited company is that you do have the ability to plan your tax to minimise some of this income tax.

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