A limited company’s accounting year runs over a twelve month period and the year end is at the end of the month in which the anniversary of when the company was set up falls. So, if you set your company up on the 15th of October, your company year end will be the 30th of October. The company can therefore be set up at any time and there is no particular time of the year that is better suited to forming a limited company.
That said, the closer that we are to the end of the tax year, on the 5th of April, the higher your earnings in that year are likely to be. This means that any dividends taken from the company before the 5th of April could well fall immediately into higher rate tax.
There are then two options: if you can afford to, it is a good idea to leave the funds in the company until the new tax year starts, when your tax allowances will start again. The second option is to withdraw the dividends; you will then have to pay higher rate tax on those dividends but this is generally cheaper than paying umbrella company taxes.
If you would like to double check the timings of setting up your limited company or the effect that this may have on your take home amounts and cash flow then please do get in touch. Contact Us
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