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Can I pay less tax, legally?

Sorry about how clueless these questions are.

Situation:

Employed full time, earning 30K in job.

I also have a software "business" (not actually registered as such). Payment taken by software payment processor in USA and sent to my bank account. Lets say £20,000. Most of this is taxed at higher rate of course - 40% through self assessment.

Can I pay less tax legally?

By setting up a company in the UK? I see corporation tax is 33% but do you still get the first £30,000 at the lower 23%? After paying income tax on dividends from the company would I be worse off?

Hopefully there is an easy answer!

Reply to
Andrew
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Be a good Global citizen-CONSUME>CONFORM>OBEY

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Reply to
tarquinlinbin

Where are you getting those 33% and 23% tax rates from? You are a number of years out of date.

Before answering your question, do you actually need to draw the whole profit out of the company? Or could you leave some or all of the profit in the company to invest back into the business?

I ask because it will make a difference to the amount of corporation tax payable.

Reply to
John

Thanks for the info.

About £10,000 withdrawn, £10,000 left in for reinvestment.

Reply to
Andrew

No. All your income is added together and you get one tax free allowance, one basis rate band and all the rest is taxed at the top rate. You can adjust the amount of NI that you pay, but as you seem to be running this business as Self Employment and you are already paying the maximun from your employement then you shouldn't have to pay any more (or did the SE rates get the addition 1%?)

There are a few tricks that you can run by using a limited company, but if you don't actually need the company anyway the cost of running it may wipe out the savings.

tim

Reply to
tim (moved to sweden)

Unless there's big tax savings to be made I would not want the hassle of a limited company.

Reply to
Peter Saxton

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