A contractor who was the sole director and shareholder of his company, had been speaking with a colleague who had worked with Cogent team members. Comparing notes, the contractor found that with the service provided by his current accountants, he was having to deal with all matters for the company, such as invoicing, chasing unpaid invoices, writing up bank records and processing expenses. However, his colleague only had to submit his timesheet and expense sheet and everything else was done for him.
The contractor wanted to switch his accounts but was confused as to where he was up to in his accounts process and how the change-over would be dealt with.
We offered that as part of the transfer, we would review his accounts and current position and give advice on the best solutions for him. All free of charge. After the review, it was clear that there were substantial tax savings that could be made by reducing the directors salary and also not paying out all the profits as dividends so as not to go over the higher rate tax threshold, as the director/shareholder did not need all the profits generated each year but was able to retain some profits in the company.
Unfortunately under advice from his current accountants, he had already taken salary and dividends for the previous tax year that would mean he had a substantial higher rate tax bill payable when doing his self-assessment tax return. However, we were able to advise the contractor of a preferred salary and dividend policy going forward, which would save the higher rate liability for future years whilst building a retained profit reserve which fitted with our new clients wishes.
Our client now feels that he has much less to do personally and has a clear and structured policy that he can understand of income he receives from his company.
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