If you have a company that owes you money there’s a great opportunity to save some tax.
In recent years many companies have been set up when a sole trader converted their business to a limited company. Part of the tax planning at the time may have been to sell the ‘goodwill’ to the company creating a large directors’ loan account.
It’s now possible, in the right circumstances, to pay yourself interest on the loan – and get it tax free.
For example, if your company owes you £30,000 it could pay you interest at 15%* – a total of £4,500. With careful planning you could receive this all tax free. As an added bonus, the company can get tax relief of the interest paid – a saving of £900 in this example.
We don’t like complicated tax planning schemes – so we like the fact that this is simple and won’t have the tax man knocking at your door!
Here’s the key points you need to take advantage:
1. Your company owes money to you. We’d suggest at least £10,000.
2. Your earned income is less than £10,600 (this doesn’t include dividends). This will apply to many small companies who pay a modest salary with the balance as dividends.
For more details just email us and we’d be happy to discuss how we can help you.
* you’d need to pay a realistic rate for an unsecured loan to a small limited company.
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