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Dave Shaw

Limited company, vat reg and dividends.

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Does any one know if you can be a limited company without being vat registered and also if you are a limited company and after corporation tax and paying yourself a basic wage, is there any caps on dividends and are they tax free?

I’m looking at different ways of expanding whilst paying the government as least as possible but still staying on the right side of the law.

 

 

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Vat is 84k income I think, if you are below that you don’t have to be vat registered

How does the dividend allowance work in practice?

Here is an example of how the dividend allowance works for a limited company owner drawing down a £11,850 salary and £60,000 dividends during the 2018/19 tax year. You can input your own salary / dividend mix into our dividend tax calculator.

The £11,850 salary takes up the entire 2018/19 personal allowance.
The first £2,000 of dividends is included within the dividend allowance.
The next £32,500 of dividends are taxed at 7.5% (basic rate) = £2,437.50.
The remaining £25,500 dividends are taxed at 32.5% (higher rate) = £8,287.50.
The total dividend tax liability is £10,725.
Notice how the £2,000 dividend allowance is tax-free, but still takes up £2,000 of your basic rate tax band (£0-£34,500 during 2018-19).


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Link too the calculator, it’s for it contracting but works the same.

https://www.itcontracting.com/calculators/dividend-tax-calculator-2018-19/


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I have just gone ltd and will be paying myself and my partner £8500 per year which is tax free and also your ni contributions gets paid for you.

This allows us both to take a further 5k a year each tax free as dividends.

Have you had a chat with an accountant as of yet as it's worth doing for an hour as they will tell you what is best

 

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I have ran Limited Companies that were VAT rated and most of your questions have been answered. My advice is speak to an Accountant and my opinion is stay as a sole trader. The tax advantages of being Limited are currently greatly reduced, and again in my opinion, the extra paperwork and red tape is just not worth the few quid you might save. 


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