Harrow is home of one of London’s top limited company contractor accountants
- Created at
- DNS Associates
Articles By This Author
- The heated debate- should vat apply to all takeawa...
- Are you prepared to go fully VAT Digital?
- Autoenrolment for Employers
- Revenue Recognition in the Oil & Gas Industry unde...
- Accounting for Decommissioning Provisions under IF...
- Are you contracting with the public sector? You ne...
- To be a Company or to be a Sole Trader: that is th...
- The Impact of Flat Rate VAT changes on small busin...
- SELF-ASSESSMENT TAX RETURN 2015/16
- 5 Things never to ignore with your business bank a...
Harrow is home to one of London’s fastest growing, accountancy practices: DNS Accountants LLP. DNS’s free cloud-based technology has allowed this accountancy firm to grow quickly and effectively, and it will do the same for your business. DNS Accountants LLP specialises in contractor accounting and has branches in north-west London, central London, and all over the UK. DNS is fast becoming the provider of choice for many limited company contractors and small businesses.
As DNS has grown, the quality of the services has not diminished. This is because DNS has managed its growth and it manages growth for all its contractor and small business clients as well.
In Harrow and elsewhere in the UK, DNS looks after the bookkeeping, accounts, accounts finalisation, filing, PAYE, and the business growth of contractors and freelancers in many business sectors. DNS looks after small businesses in retail, hospitality, retail, health and many other markets. DNS also looks after CIS contractors, and individuals with complex accounting needs.
DNS has helped set up thousands of businesses in Harrow and elsewhere in the country. From choosing a company name to opening a bank account, from assigning a company secretary to naming a registered office address address, DNS is on hand to advise and implement.
Becoming a limited company
Things change from a tax point of view once you become a limited company: the company has to pay tax on its profits and you have to pay personal tax on anything you draw out of the company; unlike via PAYE, National Insurance is paid on dividend distributions. Limited company contractors pay corporation tax of 20% on all profits plus personal tax.
After you allow for deductions for expenses (such as accountancy fees, salaries, or computer equipment), the company’s retained profit may be distributed to its shareholders via dividends.
How do you pay yourself a salary?
Most limited company contractors and small businesses hire an accountant to take care of their tax obligations. It is a false economy to turn yourself into your company’s accountant: first, because accountancy fees are tax deductable and second, because an accountant will probably save you more money than you spend on fees. There’ is also the time factor to consider: it takes time to keep on top of your accounts, keep up with changes to the tax laws, and meet all your company’s tax deadlines, and you should use all this precious time to make your business a success and leave your accountant to look after your accounts.
In short, for most contractors, hiring an accountant is essential, but hiring an accountant that offers a fixed-fee package and free online bookkeeping and accountancy software is the key to the success of your business start-up. You will be in control.
What about dividends?
As a limited company contractor, you will draw most of your company’s retained profits as dividends. You must ensure that the company has sufficient retained profit to cover them.
Clearly, your accountant should be the first port of call if you have any doubts at all about the amount of dividends you wish to declare. DNS provides advice, support, guidance and the software system to ensure you make the most of your business profits.
Dividends must be paid to shareholders according to each individual’s shareholding. For most contractors, this is usually 100% (for a sole shareholder), or 50% each for joint shareholders (such as spouses).
How are dividends taxed?
Dividends are taxed on the gross dividend you declare, rather than the net dividend. Therefore, if you distribute £10,000 of retained profit to the company’s shareholders, you multiply this amount by 10/9 to give a gross dividend of £11,111.
Dividend tax is applied to this gross amount, after allowing for a nominal 10% tax credit, which applies to all dividends, from any UK company. The tax credit is provided to make up for the fact that the company has already paid corporation tax on its profits.
You pay your dividend tax liabilities via the self-assessment system. This means you have to fill in a tax return each year, and submit it by 31st January.
Your hard-earned income as a limited company owner requires an expert in tax planning: how will you time your dividend declarations and how will you structure your company shareholdings?
Here are three rules taking money out of a company:
a) Are there enough profits in your company accounts to cover any dividends you declare?
b) Have you put aside a proportion of your dividend income to pay your tax liability on 31 January each year?
c) Do you keep accurate records, i.e. dividend vouchers and board meeting minutes? You may need to produce them.
DNS look after the accounts of thousands of trusted clients in north-east London, in Harrow, but all over London and the UK. We look after the accounts of their colleagues, friends, family, and thousands of businesses that have been recommended to DNS. DNS offer very generous referral incentives so check out DNS today.