How do I take money out of a company limited by shares?

0

Hi, I’m hoping you can help me out with a question I’ve got. I have just formed a new limited by shares company. I have registered with Companies House, gotten my documents in the post and have registered with HMRC. Now, I’m ready to start trading; however, once I do start trading, how am I supposed to take money out of my company? I am its sole employee and shareholder, but are there rules about how I am allowed to take money out?

Answers

0

Due to the fact that all business income belongs to the company in the first instance, you have to follow certain procedures to extract money from the company for your own use. You can take money out of your business bank account in the form of a director’s salary, dividends, expenses and a director’s loan.

  1. A director’s salary can be paid from the company bank account to the director through PAYE. To do this, you have to register your company as an employer. The company will deduct Income Tax and National Insurance form the salary before it is paid to the director. The company will then pay these tax liabilities to HMRC through PAYE.
  2. Dividends can be paid to shareholders whenever the company has remaining profits after business liabilities and taxes have been paid or accounted for. Directors must ‘declare’ dividends at a board meeting and fill out a dividend voucher for each payment - you need to do this even if you are the sole director and shareholder.
  3. Directors can claim business expenses from the company - these payments are processed through PAYE.
  4. A director’s loan is money that the director pays to the company (start-up capital, for example) or the company pays to the director that is not a salary, dividends or expenses. These transactions must be recorded in a director’s loan account. If a director is simply reclaiming money they put into the company, the do not have to pay any tax because it is not considered taxable income.

You cannot remove money from your company bank account for your own use by any other means because the company’s money is not your money until it has been lawfully transferred through an appropriate channel.

a year ago
 

Your answer

 

Browse other questions tagged #limited-company #limited-by-shares or Ask a new question