Don’t forget that the tax regime for limited companies is changing at the end of the tax year for those who haven’t heard (if you’re a director you should have heard about this by now!). There are a number of things you ought to do over the next few days before the 6th April if you haven’t done so. Firstly the dividend rate for those who earn between the personal allowance (currently £10,600) and £42,385 is changing. Currently they come with a 10% tax credit which effectively makes them tax neutral; so no tax to pay (ask your accountant/tax adviser if you don’t understand this as I don’t have the space to explain it here).
Under the new rules you’ll get the first £5000 of dividends for free and then you’ll have to pay (yes, hand over, on top of) 7.5%. So here’s today’s tip: work out if you have any profit left to take from the current year’s trading, and take it in the form of dividends asap. If the company needs working capital; you can lend the company the money back which you can later extract tax free (as it was a loan to the company).
Next 2 tax tips; top up pension payments to defer the higher rate tax band & use up any ISA allowances available. Obviously bounce these two off your financial adviser before you jump headlong into this – I’d also let the better half know you’re doing this too!
Regarding the paragraph above relating to the dividends; it ought to be noted that a director taking a stipend wage can actually top his salary up to the personal allowance (£11,000 after April 6th 2016) and then take £5000 of dividends tax free making a £16,000 tax free amount.
Also worth noting; the first £1,000 of interest is now also non-taxable. Although obviously anyone with enough money to earn £1,000 in interest is usually smart enough to have it somewhere with a higher return than a bank.
For those that have not yet done their tax 14-15 tax return; there are even more fines coming. Starting in May HMRC are going to be dishing out £10 a day to anyone who hasn’t done the last return by then.
Pertinent to landlords in particular is the loss of the wear & allowance. This is currently available and is 10% of the net rent to those rent furnished properties. Also the restriction to the mortgage interest starts to kick in. In case you haven’t heard for higher rate tax payers who would get a reduction to their 40% tax bill will have that restricted to 20%. This comes in over the next 4 years in 5% chunks.