Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: Kev R on November 14, 2007, 07:32:11 pm
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Is it worth becoming limited?
what are the pros and cons?
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Your local Tax Office would be a good place to start. They will have a booklet on the tax situation for new and small companies.
There seem to be 3 reasons that individuals form companies:
1. To isolate themselves as an individual from their business's VAT.
2. To isolate themselves as an individual from liability.
3. To gain a tax advantage (this advantage is often a lot smaller than some would lead you to believe).
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Alex
3. Quite correct , any tax advantages are soon taken up with higher accountancy fees, and all the extra red tape.
Dave
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Number 2) on the list - just wondering if you ran into trouble and say ran up a huge debt could you limit how much you could be accountable for when it came to the crunch? (i now nothing at all and am asking).
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this is an interesting post I have been thinking of doing this and would love to hear others feedback on it, indepth if possible
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I know someone in a different trade who has become a limited company, he and his wife are both directors of the company. They have used their company to purchase land from their own back garden so that they could then build another house. They now have three properties to the value of one and a half million. The guy can't possibly earn enough to pay three mortgages so i can only think that by using his company somewhere along the line he has protected himself when the inevitable happens. He also takes ten weeks holiday a year, runs a mercedes and a bmw, has a jetski and a speedboat. One guy on his own can no way earn that kind of money in his trade.
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this is an interesting post I have been thinking of doing this and would love to hear others feedback on it, indepth if possible
Just ask your accountant,any good a/c could tell you straight away if you should go LTD or not
.It would be my guess that very few w/c;s would benifit from being LTD.
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ltd all the way and if you get decent accountant it does have huge benifits. with regards to liablity for debts you find in todays world when borrowing the crediter will ask you to gaurantee the debt if the company goes bust, As so many people in the past rang up huge debts and folded there companys. ive been ltd for 3 years now and just pay corp tax and pay myself in dividends next every month. Also as far more professional when tendering for large contracts.
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I went Ltd about 4 years ago.
Then the government put a £10K tax threshold on Company Tax and NO tax on Dividends. So in effect you could earn £14000 before paying Tax!
The last year self employed I paid £3500 tax
First year Ltd I paid NO tax. It cost me £500 to set up Co, including A/C fees.
The following years it has been just over half what I did pay. I would say, over 3 years I have saved about £6000 in Tax
Mind you, it costs me double the A/c fees for the company.
All been changed now - £10K threshold has gone but the rate is still only19%.
So I wouldn't jump at the chance to go Ltd. Unless you are expanding.
David
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david £3500 tax for a year is low how much is that on if you dont mind me asking?
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I know someone in a different trade who has become a limited company, he and his wife are both directors of the company. They have used their company to purchase land from their own back garden so that they could then build another house. They now have three properties to the value of one and a half million. The guy can't possibly earn enough to pay three mortgages so i can only think that by using his company somewhere along the line he has protected himself when the inevitable happens. He also takes ten weeks holiday a year, runs a mercedes and a bmw, has a jetski and a speedboat. One guy on his own can no way earn that kind of money in his trade.
What does he do? and maybe he has anothe income which you don't know about....or maybe no-one knows about ;D Joke
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I went Ltd about 4 years ago.
Then the government put a £10K tax threshold on Company Tax and NO tax on Dividends. So in effect you could earn £14000 before paying Tax!
The last year self employed I paid £3500 tax
First year Ltd I paid NO tax. It cost me £500 to set up Co, including A/C fees.
The following years it has been just over half what I did pay. I would say, over 3 years I have saved about £6000 in Tax
Mind you, it costs me double the A/c fees for the company.
All been changed now - £10K threshold has gone but the rate is still only19%.
So I wouldn't jump at the chance to go Ltd. Unless you are expanding.
David
David,
Do you get taxed on your dividends? As far as I read it you would pay corporation tax of 19% and then you pay tax on your dividends (minus some relief).
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You pay no more tax on the dividents once you are a basic rate tax payer - ie up to £34600 for 07/08. Don't forget, you pay no NI either if you take a 5k directors salary and the rest as a divident.
You can see a comparison table here - http://www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm
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david that looks really intresting, do you have to pay vat if your ltd or only if your over the 62k(i think its that) thresh hold??
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Hi Ronnie
You only have to pay VAT if you are over the 62k threshold.
David
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You pay no more tax on the dividents once you are a basic rate tax payer - ie up to £34600 for 07/08. Don't forget, you pay no NI either if you take a 5k directors salary and the rest as a divident.
You can see a comparison table here - http://www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm
That's very useful, thanks David.
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Glad to help.
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i know people may not want to answer this but how much are people paying in tax cos its hammering me ive got about 4500 due in jan and then about 3000 due in july what legal ways are people using to avoid tax ive been told by my accountant that im close to needing to become a ltd company but he said the benifits aren't as great now as they used to be. i need to do something cos im sick of giving so much money to the tax man when i would like to get a new van.
also to those who pay 40% tax what motivates you to keep earning above a the threshold cos it must kill you having to give nearly half your income above this level away. it seems to me instead of encouraging growth in small business the payment on account system of tax penalizes it.
also how many people use their wifes personal allowance in their business i know the rules are changing on this but if you have her involved in the admin side of things surly you can spread the burden
please any ideas much appreciated
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I think its just 32% when your limited is maxium tax % unlike 40% for sole trader or employed.
Dave
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i know people may not want to answer this but how much are people paying in tax cos its hammering me ive got about 4500 due in jan and then about 3000 due in july what legal ways are people using to avoid tax ive been told by my accountant that im close to needing to become a ltd company but he said the benifits aren't as great now as they used to be. i need to do something cos im sick of giving so much money to the tax man when i would like to get a new van.
also to those who pay 40% tax what motivates you to keep earning above a the threshold cos it must kill you having to give nearly half your income above this level away. it seems to me instead of encouraging growth in small business the payment on account system of tax penalizes it.
also how many people use their wifes personal allowance in their business i know the rules are changing on this but if you have her involved in the admin side of things surly you can spread the burden
please any ideas much appreciated
Get urself a decent accountant :)
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i know people may not want to answer this but how much are people paying in tax cos its hammering me ive got about 4500 due in jan and then about 3000 due in july what legal ways are people using to avoid tax ive been told by my accountant that im close to needing to become a ltd company but he said the benifits aren't as great now as they used to be. i need to do something cos im sick of giving so much money to the tax man when i would like to get a new van.
also to those who pay 40% tax what motivates you to keep earning above a the threshold cos it must kill you having to give nearly half your income above this level away. it seems to me instead of encouraging growth in small business the payment on account system of tax penalizes it.
also how many people use their wifes personal allowance in their business i know the rules are changing on this but if you have her involved in the admin side of things surly you can spread the burden
please any ideas much appreciated
Why not lease a van,all payments are tax deductable.Maybe also lease or buy some new gear.Put your wife on the books, increase amount paid to part time lads,and those 2 school kids that give you a hand delivering flyers,all these should reduce your liability.
Oh yeah and find a better a/c.
.S I see someones already said that.Sorry