I own a Micro Entity company which makes around £2,000 - £3,000 profit per year. I'm the only employee in the company. I wish to start taking what you could call a salary each month of £100 - £200, just to help me out financially. With this being such a small company with only 1 person involved, is it right to just take the money or does it still need declaring?

I'm new to this so I want to make sure I'm doing things correctly.

  • Is it a limited company, or do you run it as a sole trader and just keep its money separate from yours? – Mike Scott Dec 22 '18 at 14:19
  • It's set up as a limited company – JTP Dec 22 '18 at 14:32
  • Just a comment as I'm not that familiar with UK business law - but possibly relevant as the "mini limited" (UG haftungsbeschränkt aka Mini-GmbH) we have in Germany was introduced as a counterpart to the UK variety: the German version would allow you to pay yourself a wage (for business owner-manager within limits depending on the financial sitiation) but at least 25 % of the profit has to go into a reserve that can later be converted into nominal capital, i.e. you cannot pay out the full profit as dividend. Wage has to be defined beforehand, though. (And certainly all needs to be declared.) – cbeleites unhappy with SX Dec 24 '18 at 16:17

You’ll need to take it as a dividend from the company and declare it on your tax return. But since there’s a £2,000 tax-free allowance for dividends, there shouldn’t be any tax to pay unless you go over £2,000 in a tax year or you have other dividend income.

  • So am I correct in thinking that if I take a dividend of say, £200 a month, there won't be any tax to pay on that £200 and it's only if that dividend goes over £2000 then there will be tax? – JTP Dec 22 '18 at 14:52
  • 2
    £200 per month every month will lead to a tax liability, because it’s £2,400 per year, which is over the allowance. – Mike Scott Dec 22 '18 at 14:59
  • Oh, I see what you're saying now. £150 would be fine though so if I do that, I can take that without needing to declare it, is that correct? – JTP Dec 22 '18 at 16:34
  • You’ll still need to declare it on your tax return, but there shouldn’t be any tax to pay. – Mike Scott Dec 22 '18 at 16:41

In the U.S., a LLC company is usually a pass-thru company such that money received by the members from the company then goes at the members income-tax rate. So the money received is treated more like salary and not as dividend.

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