You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell (or ‘dispose of’) property that’s not your home. For example, buy-to-let properties, land, or inherited property.

In most cases, you do not need to pay the tax when you sell your main home.

For UK property disposals made from 6 April 2020, you have 30 days after the property’s completion date to report and pay any Capital Gains Tax due on your UK property disposals.

How to report and pay the tax

You’ll need to create a Capital Gains Tax on UK property account before you can report and pay the tax using this service.

To use this service, you’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one. If you already have a self-assessment gateway account, please use the same user ID and password to create the Capital Gains Tax on UK property account using the below link:

https://www.access.service.gov.uk/login/signin/creds

You can contact HMRC on 0300 200 3300 for general inquiries about Capital Gains Tax if you need help accessing the service.

If you can not access the above link, please follow the steps provided in a separate attachment to this email

Please keep the following information ready:

• property address and postcode
• the date you got the property
• the date you exchanged contracts when you were selling or disposing of the property
• the date you stopped being the property’s owner (completion date)
• value of the property when you got it
• value of the property when you sold or disposed of it
• costs of buying, selling, or making improvements to the property
• details of any tax reliefs, allowances or exemptions you’re entitled to claim
• property type, if you’re a non-resident

If you have signed a Personal Guarantee…

Often directors are required to provide a personal guarantee as security for business loans. Attractive at the time, this is security at the end of the day and will be used as such to recover money owed, just like any other security e.g. Property or assets

Am I Liable?

If anything goes wrong or the terms of the loan agreement are broken, any previous repayment agreements become null and void. This means the guarantor(s) are liable for the full value of the liability.

Not only are all signatories liable, but repayment can also be requested at any time. If you do not have the cash reserves to satisfy the creditor’s demand this will result in serious repercussions.

In this case, the creditor can issue a statutory demand, make you bankrupt and ultimately repossess your personal assets including your home and businesses.

Loan Sales

Recently we have seen an increase in the number of directors having their loans sold to third parties. The companies, sometimes called “Vulture funds” employ aggressive repossession techniques and are commercially-minded, making them harder to negotiate with.

If you haven’t signed a Personal Guarantee 

In this case, you are not automatically liable for the business’s debts however, there are some circumstances in which you may be made liable. Especially as a result of recently introduced legislation:

Finance Act 2020 

Under Schedule 13 of this bill, HMRC can pursue directors of ‘Phoenix’ companies, i.e. companies that have been dissolved to shed liabilities and then re-established under a new name. Companies can be investigated in relation to:

• Number of company Insolvencies
• Non-payment cases

This legislation allows for the removal of the corporate ‘veil’ in such instances and will see HMRC issue joint and several liability notices to guilty directors, potentially leaving them liable for:

• Unpaid tax liability in the new company
• Any tax liability in Newco for 5 years, from the date of the Joint and Several Liability Notice
• Any old company liabilities

Coronavirus (Ratings) and Director Disqualification (Dissolved Companies) Bill

This bill is not yet in law but its retractive nature means investigations can be carried out for companies dissolved up to 3 years ago. Its main purpose is to:

• Prevent the dissolution of companies to avoid investigation into the directors
• To prevent ‘pre-pack’ administration i.e. the dissolution of companies to shed liabilities and transfer assets to a new company
• To prevent directors from using the company dissolution process as an alternative to formal insolvency proceedings

If you have/are planning to dissolve a limited company, you may find yourself under the microscope. If your conduct is found to be questionable, it could have dire consequences for you and your business.

Again, the corporate ‘veil’ can be lifted, leaving former directors liable for the company’s debts. This is especially likely if the company was a recipient of a CBILs/BBLs loan.

What do I do next?

Most importantly, there are always options therefore you don’t have to face the stress and uncertainty of being liable for repayments by yourself. Please contact us and we will provide you the details of our associates and the best pre-insolvency consultants

Limited company directors – salary vs. dividends in 2021/22

One of the main benefits of working via a limited company is that you can take advantage of tax planning measures not available via other business structures (such as umbrella companies).

This article has been updated for the 2021/22 tax year.

The main benefit of drawing down dividends from your company is that they are not subject to National Insurance deductions, unlike salaried income.

As a company director, as you are in control of your own finances; you can decide when to declare company dividends – you may want to postpone taking a certain amount of dividends until a future tax year, for example.

For a number of reasons, we will explore below, most limited company professionals pay themselves a small salary and distribute the rest of their company profits as dividends.

Optimum salary for company directors in 2021/22 – key considerations

When deciding on the level of salary you pay yourself in the current tax year, you need to consider various factors, particularly the current income tax (personal allowance) and National Insurance thresholds.

·         Take into account any salary already earned from a previous job (if applicable), when working out how much further salary you wish to draw down in the current tax year.

·         The current tax-free personal allowance is £12,570, so if your salary is less than this amount, you will have no PAYE income tax to pay at all.

·         The value of the personal allowance is gradually withdrawn by £1 for every £2 you earn above £100,000 each tax year. This means that your entire personal allowance will have been removed by the time you hit the £125,140 mark.

·         Your company pays 13.8% Employers’ NICs on salaries above the Secondary Threshold of £170/week (£8,840/year).

·         The ‘Employment Allowance’ allows eligible businesses to reclaim up to £4,000 in Employers’ NICs. However, company directors who receive small salaries will not benefit unless they earn £8,840 or more. You cannot claim the EA if you are a sole director, with no other employees.

·         As a company employee, you pay 12% Employees’ NICs on wages in excess of the Primary Threshold of £184/week (£9,568/year). You can check the latest NIC rates and thresholds here.

·         Check with The Pension Service to see if your state pension will be affected by the level of NICs you pay, as if you pay yourself too low a salary, you may affect your pension entitlement. You can access a personal pension statement if you register online via the Government Gateway.

·         If you have a contract of employment with your company (however unlikely this may be), then you must pay yourself the National Minimum Wage @ £8.91 per hour for adults aged 23 or over.

·         You should also check with your accountant if there is a minimum salary required if you make contributions to a personal or executive pension scheme.

This article assumes that your contract work is not subject to the IR35 rules. Any income caught by IR35 must be taxed in the form of a deemed salary, rather than dividends.

What is a tax-efficient directors’ salary in 2021/22?

As well as looking at the new NIC thresholds, the optimum salary paid to directors depends on whether your company can claim the Employment Allowance (EA) or not. This incentive refunds the NIC bills of eligible businesses to encourage them to take on staff.

The rules changed in April 2016, so if you’re the sole director of a company (with no other employees), you cannot claim it. There are several other restrictions that limit the eligibility of many small companies.

a) £8,840

For the 2021/2 tax year, if you pay yourself an £8,840 salary, you will pay no income tax or National Insurance at all. This number is the Secondary Threshold, below which no Employers’ NICs are payable.

£8,840 is a tax-efficient salary if you cannot claim the EA. No NIC or Income Tax payable.

This is likely to be the optimum salary level for sole director limited companies.

b) £12,570

If your company can claim the EA and pays a director/employee a salary of £12,570, there is no income tax to pay (as this is the same amount as the personal allowance).

Ordinarily, you would also have to pay Employees’ and Employers’ NICs of £360.24 and £514.74 respectively.

However, the Employers’ NIC element is cancelled out by the Employment Allowance, so your only liability is £360.24 in employees’ NICs.

Also, by taking a £12,570 salary, you save £708.70 in additional Corporation Tax you’d have to pay if you take an £8,840 salary.

So, £12,570 is the most tax-efficient salary to take for the 2021/22 tax year if you can claim the EA (you’re better off by £348), although there is a little more admin involved.

Further Considerations

The calculations in this article have been validated by our accountant. We recommend that you seek professional advice from your own accountant before setting your company’s salary levels.

When working out dividend amounts, you must ensure that you have sufficient retained profit in your company, otherwise your dividend declaration could be classed as ‘illegal’.

You should discuss your overall remuneration strategy with your accountant before relying on any information contained within this article; after all, this is the most important aspect of the service they should provide you.