Who on here has a LIMITED company?
01-09-2006, 06:07 PM
#1
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Who on here has a LIMITED company?
We are getting told to go limited. Several people have told us its for the better BUT seems a hell of a load of hassle compared to being in a partnership like i am now!
Do the advantages outweight the disadvantages? I know Markk on here explained a bit to me but id like more advice really if anyone knows...
Cheers
Do the advantages outweight the disadvantages? I know Markk on here explained a bit to me but id like more advice really if anyone knows...
Cheers
01-09-2006, 06:16 PM
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I am limited.I believe it was easier to do it 5 yrs ago but I dont really know the partnership side of things.i get mileage allowance and if i work more than 10 hrs a day I get 23 quid for expenses. Will IR35 affect you though?
Will IR35 affect you though?
01-09-2006, 06:16 PM
#3
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It depends how you run it....
I am AFRacing LTD and that works well as I can put allmy car stuff through the company, however if I wasnt into cars it becomes a nightmare getting the money out with paying FULL tax and double NI on it.
Remember to play the tax game and pay your way full is expensive and there is still the cost of running the company on top of that - figure £25 a year fees and acoounts range from 400-1000 a year!!!
Alex
It depends how you run it....
I am AFRacing LTD and that works well as I can put allmy car stuff through the company, however if I wasnt into cars it becomes a nightmare getting the money out with paying FULL tax and double NI on it.
Remember to play the tax game and pay your way full is expensive and there is still the cost of running the company on top of that - figure £25 a year fees and acoounts range from 400-1000 a year!!!
Alex
01-09-2006, 07:06 PM
#5
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Lee... didnt we have all this when you were talking about starting your own business about 4 months ago...
If you operate as a limited company then you liability is limited, if it all goes tits up the creditors cant take your house.
Basically, a limited company is an entity in its own right that can sue and be sued.
You can operate in a tax efficient manner by paying dividends to the shareholders in the company based on profits, providing there are profits of course.
But as has been said dont listen to what people say.
Get your arse to an accountant and talk it over with him.
If you operate as a limited company then you liability is limited, if it all goes tits up the creditors cant take your house.
Basically, a limited company is an entity in its own right that can sue and be sued.
You can operate in a tax efficient manner by paying dividends to the shareholders in the company based on profits, providing there are profits of course.
But as has been said dont listen to what people say.
Get your arse to an accountant and talk it over with him.
01-09-2006, 07:13 PM
#7
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Yes neil i did post before. Business is going well as it is but we just think that it looks more pro to be limited and can be an advantage that way...plus as you say the company is liable not you...
What i dont understand is the dividends bit. Im going to talk it over with sister inlaw tommorow shes my accountant.
Just thinking out loud really as i do often
What i dont understand is the dividends bit. Im going to talk it over with sister inlaw tommorow shes my accountant.
Just thinking out loud really as i do often
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01-09-2006, 07:31 PM
#8
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as said really is worth it if all does go wrong least they cant take your house
maybe its worth still speaking to another accountant as family members usually always want to do everything by the bookas theres lots and lots of ways of saving money
maybe its worth still speaking to another accountant as family members usually always want to do everything by the book
as theres lots and lots of ways of saving money
01-09-2006, 08:00 PM
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This may help you a bit on the dividends :
Taking the dividends is easy, you can take out whatever you have in your business account tax free unless you exceed approx £38500 which includes your salary in a 12 month period (if you only have 1 shareholder) .....
For example :
If you can take your dividends + salary and fall below £38500 gross you wont be subject to 25% Tax on the total above this limit. People get around this by having two shareholders therefore you are entitled to a limit of £77000 gross before paying the 25% tax
When you take out a dividend from your business account its a net figure not gross (which for an example of £1000, 1000/9*10 = £1111.11 is what your actually taking from the account) as your taking nine tenths of the total.
You ideally don't want to be paying a very small salary (ie 5000) which will be subject to very small tax and NI contributions and large dividends, (although this is how the umbrella companies work) as the IR are wise to this and one of the reasons IR35 was put in place.
Taking the dividends is easy, you can take out whatever you have in your business account tax free unless you exceed approx £38500 which includes your salary in a 12 month period (if you only have 1 shareholder) .....
For example :
If you can take your dividends + salary and fall below £38500 gross you wont be subject to 25% Tax on the total above this limit. People get around this by having two shareholders therefore you are entitled to a limit of £77000 gross before paying the 25% tax
When you take out a dividend from your business account its a net figure not gross (which for an example of £1000, 1000/9*10 = £1111.11 is what your actually taking from the account) as your taking nine tenths of the total.
You ideally don't want to be paying a very small salary (ie 5000) which will be subject to very small tax and NI contributions and large dividends, (although this is how the umbrella companies work) as the IR are wise to this and one of the reasons IR35 was put in place.
01-09-2006, 08:45 PM
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I own a couple of limited companies, being limited saves me litterally thousands in tax - I pay next to nothing compared to if I was a sole trader. I've got a really good accountant too, saves me lots more then he costs me which is exactly what an accountant should be doing 
01-09-2006, 09:22 PM
#15
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thanks all.
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
02-09-2006, 05:16 AM
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Originally Posted by Lee Reynolds
thanks all.
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
God I hate fookin labour
02-09-2006, 08:54 AM
#17
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Thread Starter
Originally Posted by starturbo
Originally Posted by Lee Reynolds
thanks all.
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
Markk i remember a bit of what ya told me but not all
As said its the tax side of things im unsure of. I want to save paying as much as possible tax so if going limited helps then ill go limited.
cos jon
Thats very helpfull mate thanks. Im still not 100% clear though...Im a builder remember....good with my hands but im not the brainiest of the bunch pmsl
So if i pay myself say a little wage of 400 a week(or 20k per year), then at the end of the 12 months i can take another 18k out untaxed?
sorry for being blonde
God I hate fookin labour
02-09-2006, 09:07 AM
#18
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Lee,
In thery you could do that but much better to spread it across the year so your not taking such a large dividend at the end. Maybe take say 1500 a month, or 4500 every 3 months and bank it if your saving. You just have to keep a record of what you take. All accountants seem to have different ideas whats best so maybe talk with yours as he'll be doing your books.
If your paying 20K a year don't forget your'll have to pay employers NI contributions too as well as your employees NI and Tax, plus a 19% tax bill on your profits......so you don't want to wipe your account clean each month..
Your alternative is an umbrella company who will do all this for you at about £25 a week, and give you a payslip with your total amount including max dividends......
Cheers
In thery you could do that but much better to spread it across the year so your not taking such a large dividend at the end. Maybe take say 1500 a month, or 4500 every 3 months and bank it if your saving. You just have to keep a record of what you take. All accountants seem to have different ideas whats best so maybe talk with yours as he'll be doing your books.
If your paying 20K a year don't forget your'll have to pay employers NI contributions too as well as your employees NI and Tax, plus a 19% tax bill on your profits......so you don't want to wipe your account clean each month..
Your alternative is an umbrella company who will do all this for you at about £25 a week, and give you a payslip with your total amount including max dividends......
Cheers
02-09-2006, 10:43 AM
#21
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Just spoke a bit with my accountant....speaking in more depth on tuesday BUT she said it probs isnt worth it at this moment in time...something to consider later... will see on tuesday,.
The next thing is VAT as we will hit the threashold
The next thing is VAT as we will hit the threashold
02-09-2006, 12:42 PM
#23
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Lee
First reaction... get another accountant.
However, the thing thats always pissed me off about builders, is the fact that as sole traders etc they can claim clothing allowances etc, yet me as a Business Professional, cant claim for suits etc because I could wear them outside my work ie going to weddings funerals & bhamitzphas...
But when do builders wear jeans... all the fookin time !!!
As a sole trader/partnership you only pay tax on the money you earn and there are all sorts of things you can offset against tax that you need for your business, like the clothing thing, tools etc.
As a Limited company, this issue is, you are always an employee of that company and therefore, if you take a salary from that company, then you have to pay the employee's tax & ni aswell as the employers tax and NI contributions and this is where its fundamentally wrong for small limited companies.
The way round this is to pay yourself a minimal salary, say £70 a week and this should keep you below the Tax & NI threshold, therefore you dont have to run a payroll.
Then you make up your money in dividends.
REMEMBER, you can only pay a dividend on a profit.
As for the tax side of things, the company pays Corporation Tax on the profit of the company.
As you cant pay tax on the same amount of money twice, then if you stay below the 40% tax threshold you will not pay any additional tax.
If however, you are coining it in and want to take more then the common dodge is to use up any 'unused' tax allowances that perhaps your wife may have, so say she doesnt work, again the company could employ her as say finance director as she does the books and then pay her the rest of the money.
The Inland Revenue are attempting to crack down on this, but I beleive there have recently been some test cases and from what I remember a couple won their case as the woman could prove she played an active part in the running of the business.
As you can only pay dividends to shareholders you then have to make your missus a shareholder. BEWARE, if, heaven forbid, you split up she has a chunk of your company and everytime you pay yourself you have to pay her, unless she elects not to take a dividend, so this could be messy.
SO, perhaps this is why your accountant is errring on the side of caution and suggesting you stay as a partnership for now.
First reaction... get another accountant.
However, the thing thats always pissed me off about builders, is the fact that as sole traders etc they can claim clothing allowances etc, yet me as a Business Professional, cant claim for suits etc because I could wear them outside my work ie going to weddings funerals & bhamitzphas...
But when do builders wear jeans... all the fookin time !!!
As a sole trader/partnership you only pay tax on the money you earn and there are all sorts of things you can offset against tax that you need for your business, like the clothing thing, tools etc.
As a Limited company, this issue is, you are always an employee of that company and therefore, if you take a salary from that company, then you have to pay the employee's tax & ni aswell as the employers tax and NI contributions and this is where its fundamentally wrong for small limited companies.
The way round this is to pay yourself a minimal salary, say £70 a week and this should keep you below the Tax & NI threshold, therefore you dont have to run a payroll.
Then you make up your money in dividends.
REMEMBER, you can only pay a dividend on a profit.
As for the tax side of things, the company pays Corporation Tax on the profit of the company.
As you cant pay tax on the same amount of money twice, then if you stay below the 40% tax threshold you will not pay any additional tax.
If however, you are coining it in and want to take more then the common dodge is to use up any 'unused' tax allowances that perhaps your wife may have, so say she doesnt work, again the company could employ her as say finance director as she does the books and then pay her the rest of the money.
The Inland Revenue are attempting to crack down on this, but I beleive there have recently been some test cases and from what I remember a couple won their case as the woman could prove she played an active part in the running of the business.
As you can only pay dividends to shareholders you then have to make your missus a shareholder. BEWARE, if, heaven forbid, you split up she has a chunk of your company and everytime you pay yourself you have to pay her, unless she elects not to take a dividend, so this could be messy.
SO, perhaps this is why your accountant is errring on the side of caution and suggesting you stay as a partnership for now.
02-09-2006, 01:17 PM
#24
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I think the reason she has said stick partnership for for now is to keep it simple until the business is up and running properly as theres a lot of work already involved in doing so without the added headaches of more paperwork at this moment in time.
She has said however that it IS worth going Limited and its something that we should look into doing soon. But as i say we are to discuss things properly tuesday...she mentioned the new limited partnership system too...
So give me an example please guys...Neil or markk??? As all the jargon goes over my head...
What would be the difference if we earned 40k each in a year as a partnership to 40k each as a limited compnay? What would we save tax wise bearing in mind the huge hike in NI contributions if limited compared to the £2.10 a week as a partnership...
She has said however that it IS worth going Limited and its something that we should look into doing soon. But as i say we are to discuss things properly tuesday...she mentioned the new limited partnership system too...
So give me an example please guys...Neil or markk??? As all the jargon goes over my head...
What would be the difference if we earned 40k each in a year as a partnership to 40k each as a limited compnay? What would we save tax wise bearing in mind the huge hike in NI contributions if limited compared to the £2.10 a week as a partnership...
02-09-2006, 01:46 PM
#26
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This is good as it clarifies the dividend, you just put in your salary and your total dividend, and it tells you what divident tax is required (as i said anything over 38500 ish and you pay 25%)
http://www.contractorcalculator.co.u...sic&Host=LOCAL
The small company rate is 19% for coorporation tax, as far as i am aware it has no relation to the dividends you take. This link will calculate your corporation tax bill.
http://www.contractorcalculator.co.u...sic&Host=LOCAL
You could get away with paying £70 a week, but your running the risk of having an Inland revenue investigation, its much better to work out all your outgoings and pay a wage that covers them, you then have some arguement if you ever get investigated.
http://www.contractorcalculator.co.u...sic&Host=LOCAL
The small company rate is 19% for coorporation tax, as far as i am aware it has no relation to the dividends you take. This link will calculate your corporation tax bill.
http://www.contractorcalculator.co.u...sic&Host=LOCAL
You could get away with paying £70 a week, but your running the risk of having an Inland revenue investigation, its much better to work out all your outgoings and pay a wage that covers them, you then have some arguement if you ever get investigated.
02-09-2006, 01:54 PM
#27
PassionFord Post Whore!!
Originally Posted by Lee Reynolds
just re read your post neil and it makes more sense, but would i get away with just paying myself 70 quid a week?
Its your company, you decide how much to pay yourself.
There was talk sometime ago about minimum wage etc etc but thus far I've never had an issue.
The only thing that will happen is every now and then the Department of Work and Pensions (pr whatever they are called now) will write to you and tell you if you dont make a payment of £X to your pension fund then you may get a reduced amount of pension when you retire.
Just send them the money and that keeps your Pension straight.
02-09-2006, 02:09 PM
#28
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Its best to pay yourself a wage that your accountant suggests for your specific industry, i was told do not under any circumstance pay below £6000 a year otherwise you run the risk of IR investigation.
Very small salaries and large dividends do get noticed, but its your life pal and some of the guys on here have not had an issue so its your call.
Dont forget that the IR can look and review up to the last 6 years worth of books. It happened to a mate I work with, he had 30 days to pay a 35K tax bill........not nice to save a little bit of money each month.
Very small salaries and large dividends do get noticed, but its your life pal and some of the guys on here have not had an issue so its your call.
Dont forget that the IR can look and review up to the last 6 years worth of books. It happened to a mate I work with, he had 30 days to pay a 35K tax bill........not nice to save a little bit of money each month.
02-09-2006, 02:53 PM
#29
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Hmmm it sounds like its a bit up in the air on wether 70 per weeks ok or not TBH i dont think i wanna risk an investigation so id probs pay myself/us a half decent wage
TBH i dont think i wanna risk an investigation so id probs pay myself/us a half decent wage
02-09-2006, 02:58 PM
#30
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So can i run this again:
Say i take a wage of 200 quid a week. I pay normal tax on that and NI contributions plus employers NI contributions.
Then every 3 months i take £6000 out of the profits as a dividend which is taxed at 19% corporate tax as its the business's profit?????
Say i take a wage of 200 quid a week. I pay normal tax on that and NI contributions plus employers NI contributions.
Then every 3 months i take £6000 out of the profits as a dividend which is taxed at 19% corporate tax as its the business's profit?????
02-09-2006, 03:04 PM
#32
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Originally Posted by markk
me and my partner get the minumum to keep us below the lel, £90 pw works out just nice 
02-09-2006, 03:25 PM
#33
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Your 19% tax is on the total profits of the company not just the dividends,
The following is worked out on 13 pay packets (every 4 weeks)
On £90 a week you'd be paying no tax or NI at all as it falls below the tax threshold of about £4850.
£750 a week = £39000 you'd be paying approx :
Tax £150.15p/w
NI (Employees) ; £58.49p/w
NI (Employers) : £80.00p/w (approx)
Your into supertax of 40% if you pay 750 a week, did you mean 750 a month ??
£750 every 4 weeks = £9750 per year : you'd be paying approx :
Tax £16.51p/w
NI (Employees) ; £10.62p/w
NI (Employers) : £15.00p/w (approx)
The following is worked out on 13 pay packets (every 4 weeks)
On £90 a week you'd be paying no tax or NI at all as it falls below the tax threshold of about £4850.
£750 a week = £39000 you'd be paying approx :
Tax £150.15p/w
NI (Employees) ; £58.49p/w
NI (Employers) : £80.00p/w (approx)
Your into supertax of 40% if you pay 750 a week, did you mean 750 a month ??
£750 every 4 weeks = £9750 per year : you'd be paying approx :
Tax £16.51p/w
NI (Employees) ; £10.62p/w
NI (Employers) : £15.00p/w (approx)
02-09-2006, 03:54 PM
#34
PassionFord Post Whore!!
The whole IR35 thing doesnt apply to someone like Lee because he's finding his own customers he working for them clearly as a contractor and is not just working as an employee as could be deemed in the IT industry.
He has risk, he has a partner who he can undertake work if he is ill, he has to buy materials etc
Clearly outside IR35
He has risk, he has a partner who he can undertake work if he is ill, he has to buy materials etc
Clearly outside IR35
02-09-2006, 04:01 PM
#35
Originally Posted by cos jon
Your 19% tax is on the total profits of the company not just the dividends,
The following is worked out on 13 pay packets (every 4 weeks)
On £90 a week you'd be paying no tax or NI at all as it falls below the tax threshold of about £4850.
£750 a week = £39000 you'd be paying approx :
Tax £150.15p/w
NI (Employees) ; £58.49p/w
NI (Employers) : £80.00p/w (approx)
Your into supertax of 40% if you pay 750 a week, did you mean 750 a month ??
£750 every 4 weeks = £9750 per year : you'd be paying approx :
Tax £16.51p/w
NI (Employees) ; £10.62p/w
NI (Employers) : £15.00p/w (approx)
The following is worked out on 13 pay packets (every 4 weeks)
On £90 a week you'd be paying no tax or NI at all as it falls below the tax threshold of about £4850.
£750 a week = £39000 you'd be paying approx :
Tax £150.15p/w
NI (Employees) ; £58.49p/w
NI (Employers) : £80.00p/w (approx)
Your into supertax of 40% if you pay 750 a week, did you mean 750 a month ??
£750 every 4 weeks = £9750 per year : you'd be paying approx :
Tax £16.51p/w
NI (Employees) ; £10.62p/w
NI (Employers) : £15.00p/w (approx)
spot on
02-09-2006, 05:16 PM
#36
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Thread Starter
i did mean 750 a week!
Ok im going to chat this over with Michelle my accountant. I cant beleive how ya can get away with paying yourself so low at 90 pe week but then take divis for all that money and not have to contribute! BUT, fuck paying all that NI
I know when i was employed i was paying around the 60 quid a week mark, but didnt realise my employer was paying 80 on top
Ok im going to chat this over with Michelle my accountant. I cant beleive how ya can get away with paying yourself so low at 90 pe week but then take divis for all that money and not have to contribute! BUT, fuck paying all that NI
I know when i was employed i was paying around the 60 quid a week mark, but didnt realise my employer was paying 80 on top
02-09-2006, 07:35 PM
#37
as an employer you will double the contributions your employee pay - it fookin sucks
e.g if i deducted £100 pounds from your salary for YOUR contributions,then I as the EMPLOYER would also have to pay an extra £200 out of MY fookin money WTF is that all about - its the biggest killer in self employment
e.g if i deducted £100 pounds from your salary for YOUR contributions,then I as the EMPLOYER would also have to pay an extra £200 out of MY fookin money WTF is that all about - its the biggest killer in self employment
02-09-2006, 11:56 PM
#38
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Originally Posted by Lee Reynolds
I cant beleive how ya can get away with paying yourself so low at 90 pe week but then take divis for all that money and not have to contribute!
and VAT
This is tax avoidance NOT tax evasion
03-09-2006, 12:20 AM
#39
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Originally Posted by Genesis Engineering
I own a couple of limited companies, being limited saves me litterally thousands in tax - I pay next to nothing compared to if I was a sole trader. I've got a really good accountant too, saves me lots more then he costs me which is exactly what an accountant should be doing
03-09-2006, 12:33 AM
#40
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Thread Starter
Originally Posted by nomad
Originally Posted by Genesis Engineering
I own a couple of limited companies, being limited saves me litterally thousands in tax - I pay next to nothing compared to if I was a sole trader. I've got a really good accountant too, saves me lots more then he costs me which is exactly what an accountant should be doing