I have a limited company and I noticed that this year we are having to pay 19% tax on our first £10,000 profits. In previous years this was £0.
Does this mean I get taxed on my company's profits then I have to pay income tax at 22% as well! This seems like double taxation to me!!
Is there any way of legally avoiding paying this company profit? Like dividends or something?
I already have an income separate to my business that takes me over my personal allowance.
Paul
It doesn't happen like that. On *what* income do you think you would be paying 22% income tax?
Remember that any income the company pays you as salary/wages will not get taxed as part of its profit.
Of course.
Basically you have a choice.
Either you get your company to pay you a salary, in which case you pay
22% tax on it (plus NI at 11% plus the company pays an extra 12.8% NI too -- but if these earnigns are less than £97 per week (or approximately the same as your personal allowance again) no NI is payable, which is just as well as the effective marginal tax rate would be 40.6%, not 22%).Or else your company pays corporation tax at 19% and gives you the rest as dividends which are tax free unless you are (or would become) a higher rate taxpayer.
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