Withdrawing Funds from Your Limited Company
How to withdraw fund from your limited company?
Knowing how much to take out of your company or business each year to remain tax efficient isn’t easy and requires well thought out consideration. We can help identify the most efficient amount to take and help ensure you remain compliant with HMRC.
If you have a large director’s loan account a great way to extract funds from your company may be via interest payments on the loan. These are a fully allowable expense in the company meaning there is a corporation tax saving at 19%, and due to the various reliefs available interest income can on occasion be received entirely tax free. Where a limited company pays interest to an individual the company will usually have to complete a CT61, withhold 20% of the interest and give this to HMRC.
As a limited company director or employee you are entitled to take a salary from your company. The optimum salary depends on whether a business has the employment allowance available which gives relief for any Employers National insurance payable. For most company owners the most tax efficient to take from their company as a salary is around £8,632 – £12,500 per year.
Where payments are made as a salary you will likely need to have a registered PAYE scheme in place and make monthly submissions to HMRC. At JSM Partners our specialist payroll team will help to ensure everything is submitted ahead of time.
Dividends still remain a tax efficient way to extract cash from your company with each individual benefitting from a £2,000 per year dividend allowance. This allows for up to £2,000 in dividends to be received tax free each year.
Amounts over and above the £2,000 tax free amount are taxed at 7.5% where they fall in your basic rate band and 32.5% above this.
There is no fixed amount for individuals to take from their company as it does heavily depend on your personal circumstances. As part of our service to clients we regularly advise on withdrawing funds from a limited company.