The most tax-efficient way to take money from a limited company

If you own or are thinking about setting up a limited company, you will want to pay yourself in the most-tax efficient method possible.
In this video, we explain how to establish the best income structure for your limited company. The different options available to you, and the various taxes that you will need to pay.
We recommend that you should consult an experienced accountant for professional advice tailored to your individual needs.
Links:
Current and previous Income Tax rates and Personal Allowances:
www.1stformations.co.uk/blog/...
Current and previous NIC rates and thresholds:
www.gov.uk/government/publica...
Information about tax on dividends:
www.gov.uk/tax-on-dividends
Guidance on expenses and benefits for employers:
www.gov.uk/employer-reporting...
A to Z of expenses and benefits:
www.gov.uk/expenses-and-benef...
Chapters:
0:00 Intro
1:20 How to pay yourself through a UK limited company
1:55 Tax payable on a director’s salary
5:08 Tax payable on dividends
7:26 Tax payable on directors’ loans
9:29 Tax payable on expenses and benefits
10:47 The most tax-efficient way to take money from a company
Website: www.1stformations.co.uk/
Blog: www.1stformations.co.uk/blog/
Facebook: / 1stformations
Instagram: / 1stformationsofficial
LinkedIn: / 1st-formations
X - Twitter: / 1stformations
#1stFormations #SmallBusiness #SmallBusinesses #BusinessAdvice #dormantcompany #companyformation #paye #limitedcompany #uklimitedcompany #directorssalary #dividends #directorsloan #allowableexpenses

[@AlexColes-wn5jg]

The best way I worked out is to put most of it into a pension and stick two fingers up at HMRC. The tax burden is insane. You can cleverly put it in a SIPP and then use that SIPP to purchase commercial property.

[@1stformations]

This is a very good idea and something lots of people do. Did you purchase a commercial property?

[@anayahairandbeauty]

Thank you for the info

[@stevendenny7260]

Hi Alex, can you buy residential property with a SIPP?

[@AlexColes-wn5jg]

@@stevendenny7260 No idea about that, corporate implies it's owed in the company so my best guess is as long as it's owned in the company and not by the human it's ok.

[@NewYear-gw2qy]

Let’s say you close your company down. Are you allowed to keep the house

[@elenakrzymuski]

What a great video! This is so useful, thank you 1st Formations 👏

[@1stformations]

Our pleasure. Have you checked out any of our other videos?

[@PriscilaDexheimer]

Really useful information, especially about the tax on expenses and benefits!

[@1stformations]

Glad you liked it. Have you checked out any of our other videos?

[@younessennaim-xi2xj]

What a great video! This is so useful, thank you 1st Formations

[@1stformations]

Thank you for your kind comment. We're glad you enjoyed the video so much! :)

[@brendynmercer435]

Super helpful video. Thanks so much!

[@1stformations]

No problem. Are you a company director?

[@aurimasliuberskis4827]

I have seen many videos by other publishers on youtube, all I can tell this gave me more understanding than all the previous combined together, thanks.

[@1stformations]

Thank you for your high praise! We're so glad you find the videos we create useful. Is there a topic you'd like us to cover in the future?

[@webpalbusiness]

Great video as expected! Thanks for sharing

[@1stformations]

No problem. Do you have your own limited company?

[@webpalbusiness]

Yes I have and I chose 1st Formation for my company incorporation

[@1stformations]

@@webpalbusiness Great! What does your company do for a living?

[@MR-Business]

Helpful insights and an indication as to what your accountant should actually be advising you to do

[@1stformations]

Thanks for your comment. Have you checked out any of our other videos?

[@AlexColes-wn5jg]

Found this video very helpful. Thank you.

[@1stformations]

Thank you! Have you checked out any of our other videos?

[@vanessaredhead3446]

Thank you for this video 1st Formations has been a great platform for me so far and you having your own KZbin channel has be so helpful in understanding how to setup a limited company correctly. Great and clear to understand videos every time thank you.

[@1stformations]

Thank you for your kind comment. Do you have a favourite video of ours?

[@vanessaredhead3446]

@@1stformations yes the one about Dormant Status this one was very helpful for me as once I registered my company I put my business in dormant status as I wasn’t ready yet to start trading. 1st Formations have everything ready and organised to set that up which is so helpful especially as a new business just starting out. It can be so overwhelming but the videos outline everything in simple and easy way to understand

[@anayahairandbeauty]

Awesome explanation and good tips and advice I have subscribed and will learn more 🎉🎉🎉🎉🎉

[@1stformations]

Thank you for your lovely comment, Anaya! What did you learn that you didn't know before?

[@user-if4yd2le8f]

Thank you for this great infomations

[@1stformations]

Thank you for your kind comment. Do you have your own limited company?

[@loosestkiwiever]

Great video, invaluable resource for new businesses

[@1stformations]

Many thanks for your comment. Have you checked out any of our other videos?

[@almiraross6434]

Thank you so much. I was fretting out over this form before I found your video. Very helpful.

[@1stformations]

We're so glad we were able to alleviate your concern. Have you recently set up a limited company?

[@almiraross6434]

@@1stformations No I've had my company for several years now, but only recently doing business with organisations in the US.

[@1stformations]

@@almiraross6434 Fantastic! We wish you all the best of luck :)

[@bekindandmerciful5145]

This is fantastic advice

[@1stformations]

Thank you for your kind comment. We're glad you found the information useful. Do you own a limited company?

[@5ARJ]

Great video!

[@1stformations]

Many thanks. Do you have your own limited company?

[@johncarpenter8651]

Great video, thanks

[@1stformations]

Thank you John. Do you have your own limited company?

[@knoxratukalou7820]

Brilliant insight ❤

[@1stformations]

Thank you. We're glad you found the video insightful. Have you got a limited company?

[@jeffjeffjeff2]

Brilliant video and explanation of some complex concepts in easy to follow language. Subscribed!

[@1stformations]

Thank you for your kind comment, Jeff. We're glad you liked the format of our video. Do you own a limited company?

[@jeffjeffjeff2]

@@1stformations Yes I do

[@1stformations]

Fantastic! Have you enjoyed owning your own company?@@jeffjeffjeff2

[@ahmetr9383]

you help me so much thanks for videos

[@1stformations]

Our pleasure. What's your favourite video of ours?

[@burhaneddinbekciogullar1918]

Thanks for video, ❤🎉

[@1stformations]

Many thanks. Have you checked out any of our other videos?

[@HowToVideoSolutions]

Fantastic information for business owners, big or small. Thanks so much 1st Formations!

[@1stformations]

No problem. Do you have a limited company of your own?

[@HowToVideoSolutions]

Yes indeed and I'm also a 1st Formations customer! Love your use of videos for educational purposes Keep up these content and let me know if you'd be interested in a side-project or collaboration! @@1stformations

[@jerendanatarova9454]

fantastic video

[@1stformations]

Thank you. Have you checked out any of our other videos?

[@harrabiibtissem9138]

Great Informations 👍 ❤

[@1stformations]

Thank you. Do you have your own limited company?

[@jaynezhang]

Very informative 👍

[@1stformations]

Thank you Jayne! We're glad you found the video useful. Have you checked out any of our other videos?

[@tommasov.7282]

Well done nic!

[@1stformations]

Thank you. Do you have your own limited company?

[@tommasov.7282]

Yes I opened it a few years ago is there a way to check online if it's still registered? @@1stformations

[@MansoorPaiwand-id7vo]

Very good

[@1stformations]

Many thanks. Have you checked out any of our other videos?

[@samiabouzeraa]

Great Job

[@1stformations]

Thank you. Do you have your own limited company?

[@samiabouzeraa]

@@1stformations hello Yes i have, QliniGo LTD

[@KodeBrands]

Interesting!

[@1stformations]

We're glad you found it interesting. Do you have your own limited company?

[@tonyyeb_uk]

Great video as always!

[@1stformations]

Thank you for your kind words. We take it you have watched some of our other videos?

[@tonyyeb_uk]

@@1stformations Most of what you post have been great for me after starting a business

[@1stformations]

@@tonyyeb_uk Great! What does your business do for a living?

[@tonyyeb_uk]

​@@1stformationsIT consultancy

[@1stformations]

@@tonyyeb_uk Great - how do you find your customers?

[@MhJ8347]

For the director loan, can you create a ltd for just 1£ shares and then do the investment on director loan account. Then as companies cash increases take out the investment slowly? Is this any problem to hmrc? It says director loan should be for temporary basis, but cant find anything else or specific for when the company is the one the owes money. What should be considered for temporary basis then? If I did the investment on DL in the starting of the LTF I shouldnt declare the DL on companies account or convert them to equity... because it will be going for over a year...

[@fouahkhalid4972]

Nice

[@1stformations]

Thank you for your kind words. Do you have your own limited company?

[@EhabSFarhan]

Good company

[@1stformations]

Thanks for your kind words. Have you used our services before?

[@abdellatifbendaoud8684]

Abdellatif Bendaoud ❤❤

[@1stformations]

Thank you. Have you checked out any of our other videos?

[@07409352]

Hi can explain how u worked out corporation tax of £8843 and £234

[@danfrost9492]

Can you do a video to get closer to what the actual MPs pay in the UK...which seems to be absolutely nothing??

[@1stformations]

Thank you for your comment and suggestion, Dan. I'll certainly pass your comment on to the content team!

[@garywhapples7172]

Very important part was explained too quickly here: when you pay dividends you pay corporation tax FIRST which is 25% !!

[@1stformations]

Thank you for highlighting this important fact, Gary. You are correct - dividends are paid after corporation tax is deducted.

[@ebonzalez3408]

⛔🤔 16:05 Corporation Tax should be £7072.01 (NOT £8843.21)??? Formula: (50270−12570−478.86)×0.19 = 7072.0166 Help me out....am I getting this wrong? Otherwise, great video! Thanks! 👍

[@1stformations]

Thanks for getting in touch - we're pleased to hear that you enjoyed the video. The calculations in the video are correct. Dividends are paid from company profits after the deduction of Corporation Tax. So, in order to pay yourself gross dividends of £37,700, the company would require profit before tax of £46,543.21. 19% of £46,543.21 = £8,843.21 The example in the video simply shows the tax payable on an annual personal income of £50,270. We chose this figure because it is the earnings limit for paying the basic rate of Income Tax. We hope this has provided clarification.

[@user-wi3sn4cl2e]

The increase in corporation tax rates may significantly reduce the tax saving in paying dividend

[@1stformations]

Thanks for your comment. Do you have a limited company?

[@saaduddinsony]

Is it possible to set variable salary for directors who are also non resident directors and should they pay income tax in the UK?

[@1stformations]

Hi there! Apologies for the delay in our response. We are not aware of any reason, from a company secretarial perspective, that director salaries could not be varied so that amounts paid may differ from time to time. It is possible that non-resident directors would need to pay income tax in the UK, for example if their income is UK-derived. It’s quite a complex area, so we would suggest seeking the advice of an accountant to assist you. We hope this helps!

[@Newlandsinnewlands]

Interesting

[@1stformations]

We're glad you liked the video! Do you have a limited company?

[@changhazi]

directors salary can be taken in last month of the financial year one payment £12,500/ ?

[@1stformations]

Hi there, could you please provide some further details so we can try and assist? Thank you!

[@ecohedge]

🙌

[@1stformations]

Thank you. Have you checked out any of our other videos?

[@auricgoldfinger8249]

Whats the best approach if you have income from privately owned property. I pay myself £50k from by ltd company but also have 4 properties which receive £50k in rent - mortgage costs are £20k

[@1stformations]

Thanks for getting in touch. If you own rental properties through a limited company, you can take the same approach when extracting profits from the business - pay yourself a smaller director's salary and take the rest as dividends throughout the year. However, if you own the properties directly (i.e. in your own name), you'll pay tax on rental profits through Self Assessment. Due to Section 24 rules, you can no longer claim tax relief on mortgage interest unless you own the property through a company. We recommend speaking to an accountant, who can determine the most tax-efficient strategy based on your circumstances. Best wishes.

[@giuseppebonelli]

If I have a company in UK and I am director but I am not resident like on my case I live in Italy, can I have a salary like director?

[@1stformations]

Thank you for your comment. In general terms, it is possible to be paid a salary as a director, even if you are a non-UK resident.

[@opulentvision9545]

Quick question, I am interested to set up my telecom business in uk with a Ltd company. Can I sponsor myself being a Director of the company who is self employed for 2 years on PSW visa. Most authentic information/advice would be appreciated.

[@1stformations]

Thank you for getting in touch. I'm afraid we cannot advise on this. We recommend contacting the Home Office or seeking professional advice from an immigration advisor or lawyer. www.gov.uk/find-an-immigration-adviser Best wishes.

[@sorthist9007]

if 0 salary was paid to me and my parents, we would take £400k profit from company. Both parents are shareholders and I am not. How should we split salary/sipp/dividends to reap the best rewards?

[@1stformations]

Thank you for getting in touch. I'm afraid we cannot advise on this. We recommend contacting an account for advice. Best wishes.

[@mohamedamineelbarhdaoui8131]

What if the company is completly inactive ( no revenu )

[@1stformations]

Then you can't pay yourself from it. Were you intending to somehow pay yourself from an inactive company?

[@WaqassKhalid]

Will it be applicable on foreign director not residing in UK?

[@1stformations]

It may be; however, the salary information may be different. Are you a company director of a UK company, but living outside of the UK?

[@WaqassKhalid]

Yes Im a uk company director living abroad and formed the company using 1st formations. Now not sure if salary tax slabs apply to me.

[@1stformations]

@@WaqassKhalid OK. Were you intending to take a salary or are you not sure?

[@MohammedAli-qq7nm]

I want to start LLC company in UK as non resident UK would you like guide me through I want to start e commerce business what is procedure and cost

[@1stformations]

Hi Mohamed, we will definitely be able to help! Please contact our Support Team via live chat on our website or by calling us on 020 3897 2233.

[@MrAirdman]

How many times in a year can you pay dividends?

[@1stformations]

Thank you for your question, Mr Airdman. Most companies distribute dividends on a quarterly basis (i.e. every 3 months), but you can choose to pay yourself a dividend whenever the company has available profits. This could be on a monthly basis, twice per year, once a year, or simply on an ad hoc basis whenever surplus income is available. Have you checked out any of our other videos?

[@edizguney.]

😍

[@1stformations]

Many thanks. Are you a limited company director?

[@NinjaMoneyDetective]

Great informations. Thanks for sharing 🫶

[@1stformations]

We're glad you found this video useful. Have you checked out any of our other videos?