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Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
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Experience:  Tax Consultant & Freelance Lecturer over 9 years experience
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I am a joint founder of a limited company in Jersey with the

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I am a joint founder of a limited company in Jersey with the other founder being a Jersey Resident. I am a UK resident, currently with a full time job of around £43K gross.With a recent pay rise I think I have just moved into the HR bracket. Next payslip will tell. We have just completed our first contract for a Jersey company and intend to take out £5K each from the profit.

My question is what is the most tax efficient way for me to draw this money? How do I pay / notify the HMRC the tax. I like to pay any tax due as I take a payment.
Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam Pathak replied 1 year ago.

Hello,

Thank you for your question.

RE: Tax on additional income

As you are now likely to be in HR band, as you mentioned, for your income from full time UK job, the money you draw from the Jersey company will be subject to higher rate tax, this being top slice income.

When you draw this money as 'dividend', as I understand you are founder/shareholder of the company, you will pay the net tax on that money at 25% effective rate (not 40%, which is otherwise the case), and you will pay this via 'self-assessment' system annually (see below), not when you receive the money every month or so.

Generally, you pay tax regularly (say, monthly) on PAYE only.

However, do ensure that you do not cross the £100k mark in total, when you aggregate your gross salary and gross dividend annually. Otherwise, you will start losing your tax-free personal allowance.

That is, say, if your gross annual salary is going to be £46,000, then you plan to draw out dividends of not exceeding £54,000 gross in a tax year.

Generally, in your case, 'dividend' is a reasonably good and natural route to take the money out of the company.

You will need to file the self-assessment tax return, to report this additional dividend income and pay tax accordingly.

For this, assuming you have not filed the tax return before as you are on PAYE, first you need to notify the HMRC that you have new source of income on the form SA1, link below:
http://www.hmrc.gov.uk/sa/forms/sa1.pdf

Or
You can complete this online via link below:
https://online.hmrc.gov.uk/shortforms/form/SA1?dept-name=&sub-dept-name=&location=43&origin=http://www.hmrc.gov.uk

Or
You can call HMRC on 0300(NNN) NNN-NNNN(lines may be very busy!) and they will guide you through re. self-assessment tax return.

You will then receive the tax return from HMRC for you to complete and submit (along with tax payment) accordingly.

Foreign income is part of the complex area of UK tax system, so it is advisable to seek a professional accountant/tax adviser's service to do these for you, to avoid any initial mistakes.

I trust the above helps.

Best wishes
Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 465
Experience: Tax Consultant & Freelance Lecturer over 9 years experience
Sam Pathak and 2 other UK Tax Specialists are ready to help you

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