Electronic Signature Lawfulness for Accounting and Tax in United Kingdom

How to eSign a document: electronic signature lawfulness for Accounting and Tax in United Kingdom

in this video I'm going to tell you everything you need to know about limited companies as an accountant chartered Tax Advisor I'm going to share the key information you need to know in order to make sure you don't have any fines and you're running your limited company [Music] correctly the first thing to talk about is what is a limited company well it's basically a separate it is a separate legal entity it kind of exists entirely on its own right if you're running a business in your own name as a sold Trader as a partnership well that is actually you you pay tax person you're personally liable so if somebody sues you or you have creditors your personal assets are potentially up for grabs whereas with a limited liability company limited company actually it's a separate legal entity so actually exists independently of you it can has shareholders it has directors who make decisions so actually when a limited company owns assets it makes profits those those assets and those profits and you know if it has liabilities they belong to the limited company not the directors and shareholders personally so for a lot of people running a business investing in property a limited company is the best way to do it because of those benefits if you're carry on a risky activity or risky trade why do that personally when your personal assets are at risk when you can benefit from a limited company and having it as a separate legal entity so if anything does happen your personal assets aren't on the line but only the companies are so with a limited company what are the filing requirements and when do things have to be in by so with a limited company there are a couple of different things that you need to do in order to basically avoid any pretty nasty fines and penalties uh with companies house and hmrc so the first thing that a company needs to do is submit annual accounts they don't usually need to be audited unless you are a very large company but you still need to submit accounts to company's house um showing the balance sheet and especially I think next year the year after that they get introduced a profit and loss that has to be shown at company's house these need to be filed within nine months after the company's year end date so what will happen is when you set up your limited company say for instance you set up in January well actually your accounting period by default will be up to the end of January then 12 months from that and that will be your period of account effectively your accounting period and of course you can change your company year end date as a lot of people do so quite often you want the calendar year end so if you were to set your company up halfway through the year you could potentially shorten it to do a short set of accounts just to basically mirror up to the to the calendar year or quite often people go over 31st of March year end just so that it's easy when you're looking at your dividends because it kind of mirrors the personal tax year so you've not got to look at okay what dividends did I take what tax you are the in it keeps it nice and simple the second thing a company has to do is a corporation tax return so this goes to hmrc obviously and what it does is it lists out all of your income some of your expense all the categories and you also include your accounts with them as well as the hmrc have your full version of accounts um and actually the corporation tax return is due 12 months after the year end but the payment of corporation tax actually due 9 months after the year end so for most people that 9month deadline is really what you're working towards with your accounts with your corporation tax with the pay paying payment of corporation tax because ultimately you know you make sense to do all of these things at once and then the last thing that companies do the third thing the last thing is a confirmation statement and this is done usually two weeks after the company's year end and it basically lists all of the persons of signific can control all the relevant legal entities that own the business with company's house so they know who actually owns the business and that's listed publicly as well so as we mentioned a limited company has to do a corporation tax return so that's what tax a limited company typically pays so on the profits of a limited company they will actually pay corporation tax now it used to be quite easy as to how much corporation tax you paid up until recently it was just a flat 19% of course they changed it they like to make tax interesting and complicated for everybody body so they've now introduced a kind of small profits threshold again where the way it works is the first £50,000 worth of profits a tax at 19% and actually from 50,000 to 250,000 you have an effective tax rate of 26.5% and then then on profits over £250,000 you have a tax rate of 25% so it's quite confusing and of course if you've got other Associated companies this brings those fresh holds down as I've mentioned on other videos but in the long and short those are the tax rates that would apply to your limited company then of course if you take the money out again as well there's probably additional taxes to pay his income tax if you were to take his salary dividends interest income or rent payments to your premises you would pay tax on them and usually they're all tax deductible with the company except for dividends What expenses can you deduct from your limited company well the good news is pretty much all expenses are tax deductible as long as they're a valid business expense the only exception for this and the most obvious and most common exception is business entertaining H Marc don't like this so if you were to incur an expense you taking a client out to dinner you would not get a tax deduction for this within your limited company but that said it's still worth putting it for your company because if you were to pay for those expenses personally you've already paid tax on that income that's in your personal bank account so actually you'd be much worse off than if you just use the company card you don't get a corporation tax deduction for it but that's fine it's still much more tax efficient then you need your own money which has already been subject to tax how can you take money from your limited company well as we mentioned because a limited company is a separate legal entity you can't just help yourself to the money transfer in and out essentially it's not your money so you need to remember this and put in the correct payment structure to actually withdraw money from your limited company quite often the most tax efficient way of taking money out is it obviously depends on your over income but for a lot of people a lot of directors is a small salary typically up to the 12,570 that's tax deductible in the company and it's pretty much taxfree for you Falls within your personal allowance there's probably a little bit of National Insurance to pay depending on whether you have other employees on the payroll and you can get that employment allowance anything over and above that dividends the only time that kind of payment structure changes is if you you can look to rent uh using your personally owned assets and you're renting them to the company such as a warehouse or an office space or if you have a large director's line where youve put money into the company and you're charging interest on that that can be a very very tax efficient way to take money out because there's no Nation insurance on that but those new two times it changes for most people it's salary and dividends what happens if you borrow money from your company so effectively if you don't actually take money out of your company as a salary dividend but you just take it out into your personal bank account you're kind of borrowing it you might repay it later on what are the tax consequences on this quite often this is what people do they borrow a lot of money from their company um and they're completely unaware of the tax consequences but actually they can be pretty dire because there's a section it's called section 4555 because that's what it is of the corporation tax act and it basically says says that where a director's loan is outstanding 9 months and one day after the year end there's basically an additional tax that's imposed currently it's 33.75 equivalent to the high rate dividend tax um rate and basically that is charged and paid by the company for you having that director's Loan account overdrawn so if you had £100,000 overdrawn director's Loan account where you owe your company that money you'll be paying about £53,000 the company will be paying £33,000 until that loan is repaid when you repay that loan whether it's by putting the money back in the bank or putting a dividend or salary through to kind of credit that loan account then the company can reclaim that tax from hmrc but generally it's not worth borrowing money from your company because as you can see the amount of tax that's actually paid is similar to the tax rate that would apply on a dividend so with your limited company you've got that set up you know all the basics around it but when's the best time to get an accountant and to it's the best time to do is as soon as you can afford to do it because an accountant shouldn't be an expense in your business they should be an asset they're an investment they should be adding value an accountant isn't there just to file the accounts and the tax returns and put those numbers in the boxes and give them to hmrc they should be a proactive business and Tax Advisor within your company so all of this stuff all the stuff we've spoken about here that is your accountant's job to worry about that and inform you about it not yours so actually the sooner you get an accountant the sooner you can take that off of your plate so to speak and focus on the more important areas of your business such as growing the business and hiring staff and dealing with your own customers so for that reason as soon as you can afford to get an accountant we definitely recommend getting one I hope you found this video useful if you have please give it a big thumbs up and also smash that subscribe button that's all for now see you next time