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poleman

  • Posts: 2854
Re: Better to be Ltd than self employed
« Reply #40 on: June 22, 2008, 05:40:51 pm »
hi poleman i am a ltd as well i have been a ltd 4 4 years now and i cant believe how can u manege 2 pay yourself 35 k for a year and tax free aswell no way i am a managing director and my wife is the secratary and our wages is £440 a mont each and our accounted say that is the best he can do how much is your turnover for a year man a few million ? lets be honest with ourselves please

If I said I take 35k in any of my post then sorry for misleading you (which I dont think I did) I looked at this just resently and The basic rate Income Tax limit is £34,600 for the 2007-2008 tax year. LETS BE HONEST WITH OURSELVES HERE  :-* and if you dont beleave me, here is the facts  ;) www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_4016453
 

Re: Better to be Ltd than self employed
« Reply #41 on: June 22, 2008, 05:57:23 pm »
Again my notions on limited are vague...

But I did think the reason you went limited was to earn 34k on basic tax and pay similar low tax on the dividend recieved above this for being a director.

I didn't know there were any other benefits (one man band size), and to be limited on 200 pw seems a bit pointless.


Re: Better to be Ltd than self employed
« Reply #42 on: June 22, 2008, 06:42:39 pm »
I believe you've been offered some very good insights into this and don't see why you can't take them at face value.

As soon as someone uses a word or concept you don't understand you get all defensive.

I disagree on one thing. You say you welcome the biz knowledge of wc's, well some do post very well on doing the job, but seriously overestimate the success and longevity of the businesses they have. They say they have been succesful for ten, twelve, fifteen years or whatever, and then they say things like they can't afford to buy a new van. It 's not a crime not to have a few bob, and at the other end none of us like those who ram their large earning down our throats.

I'm not talking about bragging or being modest, i'm saying that some of the guys who post advice on biz and use themselves as successfull examples can't see that perhaps they are not a success in biz terms.

All the ones I read and think 'cor I wouldn't mind some of that tend to be the ones who get the flak.

Maybe you're just a poor judge.

Re: Better to be Ltd than self employed
« Reply #43 on: June 22, 2008, 06:54:34 pm »
in fact i'll give you a quick no particular order list of biz brains posters

M clean(every aspect) ww (organic growth,credit control) me (systems&strategy) Tenant, gordonswindows, joe, alan, pj,mick hay,all three mods......


There are quite a few, at a pinch i'd even put you on there Ewan.

Lakes and Pennine

  • Posts: 272
Re: Better to be Ltd than self employed
« Reply #44 on: June 22, 2008, 08:17:46 pm »
From my memory of being a limited co, de registered 4 years ago now. I was md, wife sec. Payed ourselves the minimum amount of wage each week so we payed nics, if you dont pay them then you are in the clarts when you come to retire. So you then pay tax on that wage, which was just pennies, but you payed higher nic's as the company pays nic's for the employee (which you are weather md or not) and the employee pays nic's.

trouble is you havent payed your self enough to live on..well not much of a life any way, so you pay yourself dividends. I did this every month as financialy needed to. But you do or did then, get taxed. I think at the time it was just 10%, then there was coperation tax on top of that as it was a profit so you were paying about 20% in all. But you were not paying NIC's on those dividends.

the downside was the added responsibility. No dipping into the takings for a mars bar on ther way home as that is the companies money. You need buisness account, chartered accountant, send your tax  (PAYE and nic's in every month (May get away with quarterly). But you need to be a far more stringent book keeper and are more likly to get investigated and you have to account for every penny.

Personaly I found it a lot of hassel after a days work and dont partiqularly miss it. However if the takings get to a certain level then I'm sure the accountant will recomend otherwise, but he is a good mate and is not that interested in a Florida holliday at my expence.

Nothing wrong with being a sole trader, get the missus on board and be a partnership and split the money, then you will also save tax.

Lakes and Pennine

  • Posts: 272
Re: Better to be Ltd than self employed
« Reply #45 on: June 22, 2008, 08:18:12 pm »
From my memory of being a limited co, de registered 4 years ago now. I was md, wife sec. Payed ourselves the minimum amount of wage each week so we payed nics, if you dont pay them then you are in the clarts when you come to retire. So you then pay tax on that wage, which was just pennies, but you payed higher nic's as the company pays nic's for the employee (which you are weather md or not) and the employee pays nic's.

trouble is you havent payed your self enough to live on..well not much of a life any way, so you pay yourself dividends. I did this every month as financialy needed to. But you do or did then, get taxed. I think at the time it was just 10%, then there was coperation tax on top of that as it was a profit so you were paying about 20% in all. But you were not paying NIC's on those dividends.

the downside was the added responsibility. No dipping into the takings for a mars bar on ther way home as that is the companies money. You need buisness account, chartered accountant, send your tax  (PAYE and nic's in every month (May get away with quarterly). But you need to be a far more stringent book keeper and are more likly to get investigated and you have to account for every penny.

Personaly I found it a lot of hassel after a days work and dont partiqularly miss it. However if the takings get to a certain level then I'm sure the accountant will recomend otherwise, but he is a good mate and is not that interested in a Florida holliday at my expence.

Nothing wrong with being a sole trader, get the missus on board and be a partnership and split the money, then you will also save tax.

Moderator David@stives

  • Posts: 8829
Re: Better to be Ltd than self employed
« Reply #46 on: June 22, 2008, 09:35:58 pm »
Google search engine is a wonderful thing

I think this says it all

www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm

Joe Lauzon

Re: Better to be Ltd than self employed
« Reply #47 on: June 22, 2008, 10:39:00 pm »
Quote
de registered 4 years ago now

Clive,

How much cost and hassal was involved in the process.  Can anyone else shed any light?

I have been told the accountant will have to value my business, and I will have to pay for the goodwill.  Plus the assets.  Effectively buy the business.  Scared me off.  I'm just wondering how much cost and hassal it is in real terms.


poleman

  • Posts: 2854
Re: Better to be Ltd than self employed
« Reply #48 on: June 22, 2008, 11:18:22 pm »
Google search engine is a wonderful thing

I think this says it all

www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm

So on that basic I am saving about 4k a year! being Ltd thats fine by me  :)

dave0123

  • Posts: 3553
Re: Better to be Ltd than self employed
« Reply #49 on: June 22, 2008, 11:48:59 pm »
Everyone seems to moan about when you become LTD your accountant costs go up??

so what if its saving you money and you claim your accountanting costs in the business its money well spent if you ask me  ??? .

I would rarther pay my accountant to work for me helping me paying workers tax,ni, and the same for me than paying the tax man.
Dave.

Joe Lauzon

Re: Better to be Ltd than self employed
« Reply #50 on: June 23, 2008, 03:32:40 pm »
Google search engine is a wonderful thing

I think this says it all

www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm


A few things to bare in mind.

That corporate tax will soon be 22%

Most people are capable of doing their own books self employed, doing them limited is a totally different ballgame.  So you may want to take accounts costs off your saving.

The average window cleaner in the u.k. net profit is around 15k.  Probably more on this forum, granted.  I think more professionally minded people are here than your average sample of window cleaners.

So in conclusion, you need to be earning very good money to make limited worthwhile.  Not worth it for your average one man band.  Well worth considering if your making good money though (and declaring it).

poleman

  • Posts: 2854
Re: Better to be Ltd than self employed
« Reply #51 on: June 23, 2008, 09:03:46 pm »
Quote
Being ltd is very different in many ways, the more you can comprehend this, the better chance you will have at making it a success.

Tax was one of the reasons I went Ltd, and yes you don’t take it lightly going Ltd, but do I stay awake at night worrying about it, no way, my accountant does all the paper work, I just give it the once over and sign   

Lakes and Pennine

  • Posts: 272
Re: Better to be Ltd than self employed
« Reply #52 on: June 23, 2008, 11:19:09 pm »
Jpoe.
At the time we were running a small colliery. I had all the mens PAYE to do sort out holl pay and VAT. Its not much in the scheam of things. But I am more of a practical bloke than an office worker and I found it a lot after a hard days slog. It may work for you Just I dont miss it.

Maybe its an ego thing in some cases having co ltd on the van (no offence to anybody). During my time I worked for 2 brothewrs. Ones pit was a ltd co the other was always a sole trader and now I know why he was. BVut just investigate and do what you think is right for you. If the accountants bills are higher well may be you will be spending 1k to make 3k in which case its worth it.

poleman

  • Posts: 2854
Re: Better to be Ltd than self employed
« Reply #53 on: June 28, 2008, 11:01:25 pm »
Sorry about bring this post back, but its important one to consider

I use business forums and the same post came up on there www.ukbusinessforums.co.uk and this was posted which really gives a good insight

..................................................................................................


There has been a wealth of posts on this subject, some giving excellent advice and some giving not so good advice.

I am not sure what mine falls under but will give you my thoughts.

First things first, consider the IR35 question before moving on.

Once satisfied, tax considerations.

Currently, on annual net profits of £50,000, the company option will save you up to £3437 per year in tax. (I am working on the basis of personal allowance salary balance dividends)

Differential pension treatment between that of a company and as a sole trade or partnership will also benefit you.

So in tax terms it first appears to be a no brainer.

Unfortunately there is a lot more to consider.

If you go limited then your accountants fees will most likely rise by iro £1,000 compared to a non incorporated trade. This will reduce the tax gain.

If you run a car through the business then depending on the car you drive this will also have a significant impact on your tax bill. An older car would mmost likely be more attractive through a limited co - a gas guzzling 4x4 would be much more beneficial running through a sole trade or Partnership.

Tax credits can be adversely affected by your choice due to dividends being grossed up - so exactly the same actual income would be treated differently for tax credits and affect the amount received.

Corporation tax rates / income tax rates - The former is rising, the latter is falling.

This government has moved the goalposts with regard to taxation of small companies more in the last five years than in living memory - who knows what is next? Income shifting will be in in some shape or form in one year, and don't rule out NI on dividends for close companies (once the election is out of the way, of course)

And once you have incorporated and got all of the reliefs then you won't get any more, or find it as easy, to go back the other way should the above come to fruition.

Then there is all the other stuff that is always bought up:

Limitation of liability - How important is that to the business?
Perception - How important is that to the business?
Administration - How good are you at it?
Directors Duties - More onerous than that of a sole trader
Loss relief - Important consideration
Associated companies - If so could increase the company tax rate.
Profit extraction - In particular dividend paperwork must now be watertight and can only come from profit.
Critical illness cover - Los salary / high dividend, are dividends taken into account by your insurers? If not could be a nasty surprise when you most need the cash.

The trouble is that a lot of advice given is to go limited due to the immediately apparent tax advantages of low salary / high dividend, and people are quick to take it up due to them naturally wanting to retain more of their hard earned profit. Yet many of the above points are not always considered and they need to be.

Don't get me wrong - my opinion is that the limited company route remains an attractive solution to many, but those who decide to go into it should do so with their eyes open and aware of the full facts. And what suits one doesn't always suit another - there is no standard answer without knowing the full facts of someones business, and even their personal traits.

Don't make this decision lightly.