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Post by pharcyde on Oct 30, 2017 22:22:40 GMT
Hi, first post, go easy on me....
A higher rate tax payer in permanent full time employment, with (for arguments sake) 50k available for investment.
On the basis of returning 7% PA, would yield 3.5k in a year. Higher rate tax payer gets 0.5k tax allowance on savings, meaning 3k gets taxed at the higher rate, = £1.5k for the tax man (booo!!).
What if..
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- Set up a limited company with that 50k as start up capital and invest – again yielding 7%.
- Corporation tax is 20% on profits, which would equate to £700 (on the £3500 interest return)
For the sake of £800 – why wouldn’t a higher rate tax payer do this? Would the paperwork/accounting necessary for a small limited company be particularly onerous??
What about a further scenario for the same limited company:
- Company leases a car for its sole shareholder at a cost of £3k per year.
- Profit for company (less car lease costs) now = £500, which would mean £100 corporation tax.
- Could shareholder run into BIK issues here?? (i'm guessing they will thinking this through)
Again – you could argue about the moral implication of trying to avoid tax – but would there be anything illegal in attempting to do the above?
Appreciate thoughts of the wise heads on this board - paricularly with any suggestions as to how one can work around the £500 higher rate saving allowance without giving half of my returns away!
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fp
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Post by fp on Oct 30, 2017 22:49:20 GMT
I'm pretty certain the car would attract company car tax.
FWIW, i've "loaned" a 6 figure sum to one of my dormant companies to invest, my sums told me it was worth doing, but there has been considerable discussion about it if you search the general P2P section
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locutus
Member of DD Central
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Post by locutus on Oct 30, 2017 22:50:36 GMT
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Post by pharcyde on Oct 30, 2017 23:15:50 GMT
Thanks for the replies - a couple of great threads there that I could have easily found with a good search!
Informative, and much to consider.
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hazellend
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Post by hazellend on Oct 30, 2017 23:26:09 GMT
Thanks for the replies - a couple of great threads there that I could have easily found with a good search! Informative, and much to consider. If you want to remove profits from your company, you need to do so as income or dividend, which you will probably okay tax on again. Best to have a spouse who earns nothing, then you can get 17k savings income per year tax free (tax free allowance + starting rate for savings + personal savings allowance), which is like rocket fuel for your investment.
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duck
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Post by duck on Oct 31, 2017 4:01:27 GMT
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pickles
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Post by pickles on Oct 31, 2017 7:46:34 GMT
Thanks for the replies - a couple of great threads there that I could have easily found with a good search! Informative, and much to consider. If you want to remove profits from your company, you need to do so as income or dividend, which you will probably okay tax on again. Best to have a spouse who earns nothing, then you can get 17k savings income per year tax free (tax free allowance + starting rate for savings + personal savings allowance), which is like rocket fuel for your investment. I can assure you a non-earning spouse will cost far more than that to keep, even if you get one that's not crazy. 
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Post by Deleted on Oct 31, 2017 9:17:36 GMT
I'd look at EIS or SEIS to move some of your income. This not only saves the income tax straight away but it also (if held for 3 years) gets you capital gains tax free benefits. Mucking about with company structures in comparison is just a faff.  |
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