One of the more popular tax structures I keep hearing about, is using a company for revenues, which then pays dividends for it's sole owner. According to HMRC, in this case, the following tax structure can take place:
- Company pays 20% taxes on all revenues earned
- Company can pay the sole owner as eg. a self-employed up to the Personal allowance (£7,475) tax-free
- The sole owner does not pay any taxes on dividends below £35K (reference)
- Dividends above £35K gets taxed on a 25% rate
- Are the above calculations correct?
- I've heard an offhand comment being made, that a company can only issue dividend after it's first operating year. Is this a rumor, a de-facto verified thing by HMRC, or completely false?
- The newly created company will not have any expenses -hence, all incoming money is profit
Thanks in advance.