Used in conjunction with a salary at or just below the personal allowance level, the extraction of funds from the company using dividends still offers the most tax effective route to minimising your personal tax liability.
This article concerns an announcement made in the Budget 2016 for which legislation will be introduced through the Finance Bill 2016.
Where loans are made to directors and unpaid nine months after the company year end, the tax charge is now 32.5% for all funds drawn.
You may have heard of this latest new initiative from HMRC sometimes referred to simply as MTD – here we look at what this is and how it will impact you and your business.
Those who work in the public sector will be only too well aware of the additional scrutiny on the use of freelancers and how they operate their tax affairs.
Over the last year, we have received calls from clients who have been asked to provide assurances about their IR35 status and tax affairs.
Our advice has been:
- Ensure your contracts are reviewed for IR35 – we would suggest this is carried out by independent expert providers rather than using the HMRC helpline and,
- Assuming this review concludes they are operating outside of IR35 – then using a mixture of salary and dividends for extracting funds out of a limited company remains a robust and effective mechanism for achieving tax efficiency.
What happened in the Autumn Statement 2016?