Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: LBWCS on February 27, 2014, 05:55:29 pm
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Have a few questions about going ltd.
At what point in your turnover would you recommend going ltd?
How many extra expenses are there compared to sole trader? eg employers liability
How do you find the extra paper work?
Most important, how significant has the tax saving been?
I know there are pros and cons but trying to work out if I should take the plunge before the end of the tax year, or perhaps change my van.
Any thoughts?
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i could be wrong but turnover is not that important..............probably is :D
Accountancy fees are higher
if your going as an employee you need someone to answer to?
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We employ 3 people but are still self employed - me and the mrs are a partnership
It's all swings and roundabouts but as a ltd company you may find it harder to get credit and deal with certain commercial customers.
Likewise some commercial customers may only deal with ltd companies.
A search of the old threads may help, but your best bet is to talk it over with your ( or a good accountant ) to look which will benefit you and your circumstances best
Darran
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Ive chatted with him and he suggests it, but I need to make a well informed decision taking his view in also.
Im not fussed about credit or dealing with clients, more the overall impact it will have Is it worth the hassel unless you get to a certain turnover?
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Yes. If your geting to vat threshold, you want to start looking at ltd. It protects your business and seperates your personal liability (to an extent). Also emplying becomes alot easier to deal with, and you able to draw diveidends on the business and pay less tax than you would being self employed. If you draw all compmay profits on divedends you wont get coperation tax either, but check with your accountant as even drawing divendends in a way that has a regular patterm hmrc can view that as salary and argue a totally different tax structure all together.
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I'm Ltd which is soooo much better for us. I now work for my Company as a Director where I sold all my gear to my company so that will be tax deducted. I now have to take a small wage each week so I won't pay lots of tax. Regards my morgage, shopping and any other expenses that comes out as dividends which I only get taxed on 10% once a year. I can take as many dividends as I like but my tax bill will be lots cheaper !!! As for Commercial makes no difference to them whether I'm Ltd or not !!!
I'm vat reg anyway have been for many many years I find beneficial as I claim back on my vans, also claim back vat on all fuel and loads of other stuff.
As for Accountant I've had mine for about 20 years and hes cool only charges me £250 a year but we do the books for our Vat
Hope this helps
Mind you when we Incorporated our Business was a bit of a pain as we had to close bank a counts and reopen as our name changed slightly due to not having my original company name, I was ok thou as we kept our vat number so getting lease on our new van was ok
Cheers
Dannymack 👍🇬🇧🇬🇧🇬🇧👍
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I am going Ltd from April. Thought about it last year but time went by and delayed it until this year.
Main reason is due to employing others. I need to protect myself, get the company it's own identity.
There are tax and ni advantages too.
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If you are making over 50k profit and employing its worth it speak to hmrc if you work alone and don't plan to expand maybe its not . All dividends over £30k+ your Sallary of £10k will be taxed at 52% rather then 42% on the higher bracket but you do save on the lower bracket around 13% and if you have a partner as a share holder they could also claim a dividend up to her lower tax bracket and again another 13% saving
I would say ltd is very much for someone who is expanding fast or has serious plans to the extra expense and paper work to run LTD isn't worth it unless you are making good profits of around 50k
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I'm Ltd which is soooo much better for us. I now work for my Company as a Director where I sold all my gear to my company so that will be tax deducted. I now have to take a small wage each week so I won't pay lots of tax. Regards my morgage, shopping and any other expenses that comes out as dividends which I only get taxed on 10% once a year. I can take as many dividends as I like but my tax bill will be lots cheaper !!! As for Commercial makes no difference to them whether I'm Ltd or not !!!
I'm vat reg anyway have been for many many years I find beneficial as I claim back on my vans, also claim back vat on all fuel and loads of other stuff.
As for Accountant I've had mine for about 20 years and hes cool only charges me £250 a year but we do the books for our Vat
Hope this helps
Mind you when we Incorporated our Business was a bit of a pain as we had to close bank a counts and reopen as our name changed slightly due to not having my original company name, I was ok thou as we kept our vat number so getting lease on our new van was ok
Cheers
Dannymack 👍🇬🇧🇬🇧🇬🇧👍
Thanks for that reply thats very helpful. I am planing on having an employee, but it will be my Dad! Forgetting the liability aspect, purely financially, at point in our turnover is it worth the jump?
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I'm Ltd which is soooo much better for us. I now work for my Company as a Director where I sold all my gear to my company so that will be tax deducted. I now have to take a small wage each week so I won't pay lots of tax. Regards my morgage, shopping and any other expenses that comes out as dividends which I only get taxed on 10% once a year. I can take as many dividends as I like but my tax bill will be lots cheaper !!! As for Commercial makes no difference to them whether I'm Ltd or not !!!
I'm vat reg anyway have been for many many years I find beneficial as I claim back on my vans, also claim back vat on all fuel and loads of other stuff.
As for Accountant I've had mine for about 20 years and hes cool only charges me £250 a year but we do the books for our Vat
Hope this helps
Mind you when we Incorporated our Business was a bit of a pain as we had to close bank a counts and reopen as our name changed slightly due to not having my original company name, I was ok thou as we kept our vat number so getting lease on our new van was ok
Cheers
Dannymack 👍🇬🇧🇬🇧🇬🇧👍
Thanks for that reply thats very helpful. I am planing on having an employee, but it will be my Dad! Forgetting the liability aspect, purely financially, at point in our turnover is it worth the jump?
its not worth it unless you are making profits over £40k minimum IMO
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I'm Ltd which is soooo much better for us. I now work for my Company as a Director where I sold all my gear to my company so that will be tax deducted. I now have to take a small wage each week so I won't pay lots of tax. Regards my morgage, shopping and any other expenses that comes out as dividends which I only get taxed on 10% once a year. I can take as many dividends as I like but my tax bill will be lots cheaper !!! As for Commercial makes no difference to them whether I'm Ltd or not !!!
I'm vat reg anyway have been for many many years I find beneficial as I claim back on my vans, also claim back vat on all fuel and loads of other stuff.
As for Accountant I've had mine for about 20 years and hes cool only charges me £250 a year but we do the books for our Vat
Hope this helps
Mind you when we Incorporated our Business was a bit of a pain as we had to close bank a counts and reopen as our name changed slightly due to not having my original company name, I was ok thou as we kept our vat number so getting lease on our new van was ok
Cheers
Dannymack 👍🇬🇧🇬🇧🇬🇧👍
Thanks for that reply thats very helpful. I am planing on having an employee, but it will be my Dad! Forgetting the liability aspect, purely financially, at point in our turnover is it worth the jump?
its not worth it unless you are making profits over £40k minimum IMO
Why do you say that? Does it not work out financially better?
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It's defo better as you won't pay as much Tax !!! 👍🇬🇧🇬🇧🇬🇧
The only thing is you can't just go buy anything on your business card like you would a sole Trader, as when you go Ltd you now work for your company and have to take a wage. If you take money out of the business on your card you have to show receipts of what it is, so it's only for business use.
If you need anything else apart from business use you can transfer money as Dividens if that makes sense
Good luck with it. 👳🇬🇧🇬🇧
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Its just not worth it on less i think at 40k profit your savings are around £2,500 a year minus account costs(I wouldn't be bothered to do all that so would pay one) so leave you with £2,000 so that's a fair amount of money if you are on less any savings get easten up by a accountants so you would be being LTD for the sake of perhaps a few hundred pounds not much value in it for owning a LTD company and being responsible for one to be considered if you are on decent money but even then self employment is simple
so for me it would be if I was employing and sending say 3x vans out a day making £30k profit per van transfering big dividend profits having taxdeductable wages going out sitting in your office being taxed 52% on dividends over £40k isn't taxing if you are just doing admin and using turnover to employ and make more thats the direction being ltd is that's what being LTD is about in my book its about making massive profits and its about motivating you to make more i think your company would only taxed 20% corporation tax on profits under £300k so you can see its basied all about growth And the company not about an individual
LTD is for guys like lee prior and others I'm sure those sort of people are
Big turn overs with permanat staff LTD is the way ofc you would have to make that transition if you were going in that direction and making healthy profits would be a good reason to consider it
I'm no expert just read a bit here and there and put 2 n 2 together speak to hmrc accountants and others who had gone this route and get more accurate explainations :)
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A lot of people forget that it 20% tax but another 9% in NI payments.
There's no NI to pay on a dividend.
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I was a sole trader for many many years now there's 3 of us and we have over a 6 figure sum turnover, my accountant recommend we go Ltd due to the ammount of tax we were paying. There's 2 directors and a self employed sub contractor. The 2 Directors pay ourselves a small wage each every week a couple hundred pound so our tax bill on that isn't as much as what we were paying. We pay our NI which is a few quid each week. As for Dividends you can take as much as you like which is 10% corporation tax on it a year, not sure where your getting 45 & 55% tax ? So our tax on what we take at the end of the year for our dividends and our tax on our wages will still be alot cheaper than the tax I was paying as a sole trader !!!! Also if anything went tits up they can't touch my house as the company will just close. 🇬🇧🇬🇧🇬🇧👍
At the end of the day the less wage you pay yourself each week the less tax you will pay !!!
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I was a sole trader for many many years now there's 3 of us and we have over a 6 figure sum turnover, my accountant recommend we go Ltd due to the ammount of tax we were paying. There's 2 directors and a self employed sub contractor. The 2 Directors pay ourselves a small wage each every week a couple hundred pound so our tax bill on that isn't as much as what we were paying. We pay our NI which is a few quid each week. As for Dividends you can take as much as you like which is 10% corporation tax on it a year, not sure where your getting 45 & 55% tax ? So our tax on what we take at the end of the year for our dividends and our tax on our wages will still be alot cheaper than the tax I was paying as a sole trader !!!! Also if anything went tits up they can't touch my house as the company will just close. 🇬🇧🇬🇧🇬🇧👍
At the end of the day the less wage you pay yourself each week the less tax you will pay !!!
There you go 6 figure turnover so it makes sence
20% tax or there abouts on dividends under your higher tax bracket so 2 directors can take £80k a year as wages and dividends saving a substantial amount of tax but if you paid yourself dividends over your higher tax bracket yes it's 52% only on that section but you never had needed to I guess as £80k is pretty sweet
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You should become an accountant pmsl !!!!
I only know a little bit as my wife deals with all that malarkey lol !!! 👍🇬🇧🇬🇧🇬🇧
I'm only the window cleaner 🇬🇧🇬🇧🇬🇧👍
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Danny, corporation tax this year is 20%.
10% corporation tax went out when 10p tax did (I think)
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Lol you prob right Poleking I'm not to sure on the % of things as wife & Accountant deal with that side of stuff, all I know is I won't pay half of the tax I've paid in the last years !!! 👍🇬🇧🇬🇧🇬🇧
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Haha, well done Danny sounds like you got a good business going and you got a good deal there with the mrs you just focus on the work and new contracts and she sorts the rest out best way !
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thanks for replies everybody. So basically financially wise, are we talking about the gap of 9% ni, which obviously the bigger the profit, the more the savings?
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Yes. And as a sole trader after £32k you move Upto 40% tax.
Accountants fees could be c.£1000p/a, other than that there are minimal additional costs.
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Not just the 9% if you're married.
In my opinion, the biggest difference is in the use of tax-free allowances. For easy maths, let's say the first 10K of income is tax-free (which it will be next year).
Then if you're working, earning £20K and your wife isn't earning, you're paying 20% tax on £10K, so £2K. If you're both earning from your limited company, her first £10K and your first £10K are tax-free, so you pay no tax.
Similar (but more complex) arguments apply if you're close to the next tax threshold (£32K), even if she is working as long as she's not actually at that threshold - you can bring some of the income into her 20% tax rate rather than your 40% rate.
You do need to discuss this with your accountant rather than with window cleaners. However, do bear in mind that if your fees will go up with your accountant, he has a minor conflict of interest. Get him to put the benefits down on a piece of paper for you and make sure you're happy with what he's explaining.
Vin
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Cheers Crystal pmsl !!! That's the best way less headache but I do have to work all the work out then do around 80 invoices which can take around 6 hours having to add on things bringing in 6 weeklys, schools 3 monthlys then there the invoice numbers to change dates ect ect. Mind you the wife then writes all the jobs into the vat book
The less maths I do the better lol !!! 👍🇬🇧🇬🇧🇬🇧
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Not just the 9% if you're married.
In my opinion, the biggest difference is in the use of tax-free allowances. For easy maths, let's say the first 10K of income is tax-free (which it will be next year).
Then if you're working, earning £20K and your wife isn't earning, you're paying 20% tax on £10K, so £2K. If you're both earning from your limited company, her first £10K and your first £10K are tax-free, so you pay no tax.
Similar (but more complex) arguments apply if you're close to the next tax threshold (£32K), even if she is working as long as she's not actually at that threshold - you can bring some of the income into her 20% tax rate rather than your 40% rate.
You do need to discuss this with your accountant rather than with window cleaners. However, do bear in mind that if your fees will go up with your accountant, he has a minor conflict of interest. Get him to put the benefits down on a piece of paper for you and make sure you're happy with what he's explaining.
Vin
My wife is self employed with another job so her free allowance is already used. How much do people pay for employers liability as I assume this is a must when you go ltd?
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If the wife is on less then £30k she could be a share holder and get say £10k a year dividend for cheaper (up to the higher rate bracket) you can get £40k cheaper but all these savings are pointless unless you are making a minium of these sort of profits also I would say not to go LTD just to save you money but more to develope into a serious business that's making or in direction to make these sort of profits and with the aim to push for more
good post by vin speak to an accountant I'm sure you will find out its not worth if without higher end profits
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Not loaded or anything Crystal but you say 'don't go limited just to save money'
Why is that?
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Not loaded or anything Crystal but you say 'don't go limited just to save money'
Why is that?
well just cos if you have a uk average profit of say £30k youre only looking at £1600 saving before all the rigmarole,and extra expenses
i dont think its worth being a company director and being responsible for a LTD for that small amount of money being self employed is so simple compared to being LTD there are savings and maybe one could consider it but i feel going LTD should be a move if you plan to be big at least and pay your self a £30k Dividend have staff making you profits and pay your admin Mrs another say a £20k dividend or up to her higher tax bracket leave £20k in the company for next year maybe this way all the rigmarole of owning a LTD company will be worth it as the savings could be several Thousand but for a few hundred quid saving personally id stay self employed.so IMO its really to be serioulsy looked at if you are making over average income or at lleast looking to be moving in that direction thats when the savings to rigmarole ratio become worth it ,
hopefully gocardless will aid me in taking over the world and being LTD lol... have 11 customers now on it whoop whoop ;D
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Not loaded or anything Crystal but you say 'don't go limited just to save money'
Why is that?
well just cos if you have a uk average profit of say £30k youre only looking at £1600 saving before all the rigmarole,and extra expenses
i dont think its worth being a company director and being responsible for a LTD for that small amount of money being self employed is so simple compared to being LTD there are savings and maybe one could consider it but i feel going LTD should be a move if you plan to be big at least and pay your self a £30k Dividend have staff making you profits and pay your admin Mrs another say a £20k dividend or up to her higher tax bracket leave £20k in the company for next year maybe this way all the rigmarole of owning a LTD company will be worth it as the savings could be several Thousand but for a few hundred quid saving personally id stay self employed.so IMO its really to be serioulsy looked at if you are making over average income or at lleast looking to be moving in that direction thats when the savings to rigmarole ratio become worth it ,
hopefully gocardless will aid me in taking over the world and being LTD lol... have 11 customers now on it whoop whoop ;D
Fair enough.
I'd concur.
£70k would definitely be worth going ltd IMO.
The gocardless will get there.
Mines slowed down a bit but nearly at my target.
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Wierd bunch customers are sometimes I spoke to 30 slow payers who are really nice and have been with me years 11 have come on 19 still pending for around 10 days been emailing them reminders every day 3 have come back to me saying they do not want to setup a direct debit one has emailed me back "stop sending me these emails I do NOT want to setup a direct debit with you" lol I asked her why did you give me your email and aggree on the phone? Waiting for responce its as if they feel bad saying no to me as if they draw the line with direct debit but will pay me when they please if I clean there windows , another really good customer turned bad shouted No I do not want to, he owes since 2 months back and he won't post date cheques I told him I'm trying to move into the future and stuff he didn't care said keep it the old way or no way some of the other 19 have sent over the bacs payment electronically after a few reminders but still not set it up they don't want to tell me this until it comes to the crunch looks like ill be having a serious cull soon as gocardless is the only direction I'm intrested in , its what will bring back the fun factor for me
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when you go ltd?[/color]
It's a must whether you are Ltd or not!!
If you employ then you have to take out employers liability insurance. So if you stay as a Sole Trader (or partnership or whatever) and employ your dad, you have to register and have E.L to cover him.
If you go Ltd then you are employed by your own company and have to have E.L to cover your dad, yourself and anyone else who works in your company (wife as director etc)