As a director it is possible to take income from your company in various ways. As the tax return looks at your full financial affairs, these sources of income will need to be included in your tax return.
One of the most common ways to receive money from your company is by receiving a salary. Although tax and national insurance may have been deducted from this, you still need to record your salary on your tax return.
Another way to pay yourself from your company, is by taking dividends. These can be taken tax-free up to £5,000. Tax will be payable if your total dividends in a tax year exceed £5,000 and would be collected via your tax code or tax return.
A director’s loan account is another option. If the company owes you money, any repayments made to you would be tax-free. However, if you charge the company loan interest, this would need to be declared.
According to HM Revenue & Customs guidance a self-assessment tax return needs to be completed if you have been a Company Director during the previous tax year irrespective of income. The only exclusion to that is if you have a non-profit organisation like a charity.
Please note, the advice given by HM Revenue & Customs on their website, presently differs to legislation.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.