Once your Limited company is set up and you ready to start working then the process is very simple. All we ask is that on a weekly or monthly basis (depending on your billing cycle or preference), you complete our spreadsheet to report your income and expenditure which you can then upload to our system via our secure client area, along with your bank transactions for the period.
We will then prepare your weekly or monthly summary for you which will detail the amounts you can take out of the company for salary, expenses and dividend. The summary also details the amounts you need to provide for in the company for the various taxes which need to be paid.
On setting up your company we will also register it as an employer with HMRC. We recommend our contractors pay “themselves” an annual salary of £7,020 per year. There are no national insurance contributions or PAYE due on this salary as it is below the upper earnings threshold. However, because it is above the lower earnings threshold then the government will ensure you national insurance contributions are still continued thus protecting any future benefits or state pensions for yourself or spouse if applicable.
Annually in April, we will submit a return to HMRC on your behalf (a P35) which details all these payment you will have already made. This is a statutory obligation. We will then be able to generate a P60 which we will send to you.
Dividends are a distribution of profit from your limited company and do not affect how much corporation tax you will pay. These come with a 10% tax credit so there is no additional tax to pay unless your total income (wages plus dividends) exceeds the basic rate threshold which is currently £35,000 with a £7475 tax allowance.
Corporation tax is a tax that is paid on the net company profits and is not concerned with any money you personally have withdrawn from the company. Simply, net sales less net expenses give taxable profit and tax is paid on this profit at 20%. Corporation tax must be paid to HMRC 9 months and 1 day after the company’s financial year end.
At the end of your financial year, BroomeAffinity will prepare the company’s annual accounts. These final accounts are approved by you, and then copies are sent to Companies House and HMRC along with the corporation tax return. HMRC will then confirm the figures and send out a statement detailing how much is to be paid and by when.
VAT registration is compulsory for businesses that have a turnover of £73,000 or more per year. However, 95% of companies can benefit from voluntarily registering for VAT and then applying to join the VAT flat rate scheme.
VAT returns are normally made quarterly. We will contact you on or around the day your VAT period ends to get any information from you that we may need, and then we will prepare the return. Once the return is ready we will upload this to your client area for you to complete online. Once the return has been submitted, HMRC will collect the VAT due by direct debit approximately six weeks after the end of the VAT period.