Hi Money123,
Advantages are:
1) Set it up right and the company pays corporation tax at 20% upto £150,000 profit (check the IR web site on www.inlandrevenue.gov.uk ) Otherwise its 30%
2) The most efficient way to get cash is via dividends. Around £30,000 per annum per shareholder has no further Tax Liability.
3) It seems the best way is for Husband and Wife to be a single shareholder (i.e both own share jointly, not individually) This stops the IR claiming against a certain law which may apportion all dividends to one person. This means you can get around £60,000 per annum out of a company with no tax or National Insurance liability.
4) Ensure that the company does not have an employment contract with you the Director. This requires you to write yourself a letter stating as such!!!. This stops liability for NI.
Disadvantages:
1) More paperwork
2) Less efficent when large withdrawls required.
3) The IR will go over you with a fine tooth comb.
Whatever you do seek professional advice, I may be wrong.
JonnyT
Advantages are:
1) Set it up right and the company pays corporation tax at 20% upto £150,000 profit (check the IR web site on www.inlandrevenue.gov.uk ) Otherwise its 30%
2) The most efficient way to get cash is via dividends. Around £30,000 per annum per shareholder has no further Tax Liability.
3) It seems the best way is for Husband and Wife to be a single shareholder (i.e both own share jointly, not individually) This stops the IR claiming against a certain law which may apportion all dividends to one person. This means you can get around £60,000 per annum out of a company with no tax or National Insurance liability.
4) Ensure that the company does not have an employment contract with you the Director. This requires you to write yourself a letter stating as such!!!. This stops liability for NI.
Disadvantages:
1) More paperwork
2) Less efficent when large withdrawls required.
3) The IR will go over you with a fine tooth comb.
Whatever you do seek professional advice, I may be wrong.
JonnyT
Car Key Boi
Well-known member
how would that work in regard to Capital Gains on Shares and CFD's?
if yuo're trading as a company, surely yuo can argue that any gains as such, should be treated as trading profits and not CG?
if yuo're trading as a company, surely yuo can argue that any gains as such, should be treated as trading profits and not CG?
FTSE Beater
Experienced member
Hi CKB
If your trading as a company then CGT doesn't come into it, although it's true to say that you could do trading out of your own personal account and earn upto £7000 tax-free.
Hi Money123 and JonnyT
As JonnyT has said, seek professional advice - it's better in the long run and there are probably loads of loop-hole that we don't know about.
One other thing to note is that you might get charged higher commissions for being a professional / corporate trader - well that's how it works with IB
HTH
If your trading as a company then CGT doesn't come into it, although it's true to say that you could do trading out of your own personal account and earn upto £7000 tax-free.
Hi Money123 and JonnyT
My parents (who are self-employed and have just become a LTD co. ) have been told by our accountant that they can £10,000 in dividends out of the company between them.
As JonnyT has said, seek professional advice - it's better in the long run and there are probably loads of loop-hole that we don't know about.
One other thing to note is that you might get charged higher commissions for being a professional / corporate trader - well that's how it works with IB
HTH
Professional advice is your best bet. You can't cut corners when it comes to the IR, you have to make sure you are bullet proof. I am not sure about the latest changes to IR35, but you need to watch out for that and for any structures which the revenue perceive to be avoidance procedures - they have their catch-all anti-avoidance legislation which gives them Carte blanche to tax you however they feel they should.
If you want to get very sophisticated then you need to look at offshore incoproration perhaps with bearer shares and discretionary trusts - it just depends on how "efficient" you wish to be woth your financial affairs.
If you want to get very sophisticated then you need to look at offshore incoproration perhaps with bearer shares and discretionary trusts - it just depends on how "efficient" you wish to be woth your financial affairs.
Trading companies pay tax at 0% for profits under £10,000, 19% between £10,000 and £300,000 and 30% over £300,000.
The only real advantage of trading through a limited company is these lower tax rates (as opposed to Income Tax/CGT at 22%/40%).
However, only trading companies qualify for the lower corporation tax rates. All other companies (including investment companies) pay tax at 30% (therefore - no advantage)
I'm not sure that the trading of stocks, futures etc amounts to a trade under the Investment Companies legislation (see Close Investment Holding Companies for definitions). This is something I am looking into for myself. I'll let you know as soon as I find anything else out.
The only real advantage of trading through a limited company is these lower tax rates (as opposed to Income Tax/CGT at 22%/40%).
However, only trading companies qualify for the lower corporation tax rates. All other companies (including investment companies) pay tax at 30% (therefore - no advantage)
I'm not sure that the trading of stocks, futures etc amounts to a trade under the Investment Companies legislation (see Close Investment Holding Companies for definitions). This is something I am looking into for myself. I'll let you know as soon as I find anything else out.
A couple of months ago I wrote to the Inland Revenue who advised me that trading Futures or CFDs would likely not be classed as a Close Investment Company. i.e. the effective tax rate starts at 19%
Trade shares and its a different matter. You will be classed as a Close Investment Company.
Additionally as dividends are classed as basic rate tax paid, if you have no other income then you can take out £29,900 tax free per person per annum.
Any further withdrawls would require 25% of the total to be paid in income tax.
If you were to trade as an individual and trading profits were your main source of income then all profits will be classed as income and taxed as such. You will not get a CGT allowance.
JonnyT
Trade shares and its a different matter. You will be classed as a Close Investment Company.
Additionally as dividends are classed as basic rate tax paid, if you have no other income then you can take out £29,900 tax free per person per annum.
Any further withdrawls would require 25% of the total to be paid in income tax.
If you were to trade as an individual and trading profits were your main source of income then all profits will be classed as income and taxed as such. You will not get a CGT allowance.
JonnyT
TheBramble
Legendary member
(Just joined t2w today so apologies for late-ish response to this thread)
Why set yourself up as a Ltd at all?
You could use a spread-betting company if you're into speculative activities (rather than investments) which is (currently) totally free of all taxes.
Why set yourself up as a Ltd at all?
You could use a spread-betting company if you're into speculative activities (rather than investments) which is (currently) totally free of all taxes.
TheBramble - welcome to T2W
Somehow, I think you might have resurrected the great ongoing debate we have here about spreadbetting / tax implications / professional traders. :cheesy:
Somehow, I think you might have resurrected the great ongoing debate we have here about spreadbetting / tax implications / professional traders. :cheesy:
petersmitty
Junior member
Technically Fundamental
Senior member
Unless you draw a nominal salary, let all the equity build up in a company bank account and sell the shares of the company to a third party as an investment which will make you eligible to claim 1m of your lifetime allowance of entrepreneurs tax relief of 100% on capital gain
. Also the buyer (assuming it's a lot of money and they are millionaires lol) will benefit from 20% tax on interest rather than 40% higher rate and could draw on the reserve as and when they please or transfer/incorporate the shares and hence the cash, into some sort of trust for their brat.
Just thinking aloud here.
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