Danger-Mouse Posted February 26, 2017 Report Share Posted February 26, 2017 (edited) I should be starting a new job soon and will effectively be subcontracting through the company I'm working for. Meaning that I will be counted as being self employed. So I was wondering whether it was worth setting up as a ltd company? What benefits/pitfalls there would be to go this route or would I be better just being self employed without registering as a company? Also an idea of any costs involved. Edited February 26, 2017 by Danger-Mouse Quote Link to comment Share on other sites More sharing options...
UKPoacher Posted February 26, 2017 Report Share Posted February 26, 2017 (edited) Did you get the vacant 'Big Issue' franchise for Donny railway station Neil? http://www.informdirect.co.uk/company-formation/advantages-of-setting-up-a-limited-company/ Edited February 26, 2017 by UKPoacher Quote Link to comment Share on other sites More sharing options...
Danger-Mouse Posted February 26, 2017 Author Report Share Posted February 26, 2017 Did you get the vacant 'Big Issue' franchise for Donny railway station Neil? http://www.informdirect.co.uk/company-formation/advantages-of-setting-up-a-limited-company/ lol I should be so lucky. Cheers Clive I'll take a look at the link. Quote Link to comment Share on other sites More sharing options...
winnie&bezza Posted February 26, 2017 Report Share Posted February 26, 2017 I just set up as Ltd and it cost me a whole £12 to do online. Quote Link to comment Share on other sites More sharing options...
Lloyd90 Posted February 26, 2017 Report Share Posted February 26, 2017 I believe (although I may be wrong) that as a company you can will pay corporation tax at 20% on any income. You can pay yourself upto the tax free threshold without paying any tax, then take upto the 40% threshold as a divident. This USED TO be tax free but I believe now you have to pay 7% tax on it. Also the first £5000 of your divident is tax free. Now as you would be paying 20% tax on all company income, does that mean as a company you MIGHT end up paying tax on your £12,500 wage (because the company paid tax on it to begin) where as this income as an individual would be tax free? Or have I worked that out wrong? Quote Link to comment Share on other sites More sharing options...
Danger-Mouse Posted February 26, 2017 Author Report Share Posted February 26, 2017 I just set up as Ltd and it cost me a whole £12 to do online. Well that sounds pretty reasonable Quote Link to comment Share on other sites More sharing options...
Mungler Posted February 26, 2017 Report Share Posted February 26, 2017 (edited) It's worth doing for all the usual reasons of running a company and offsetting costs and expenses against income. I dunno what you do, but if there's anything that you'll be doing as a consultant / contractor that could get you in to trouble or sued for negligence then the limited company will be a useful contractual firebreak - if what you do goes wrong you might have the opportunity to send the company down the river and walk away. You will need to make sure your corporate structure and contracting paperwork is correctly drafted and supportive. . Edited February 26, 2017 by Mungler Quote Link to comment Share on other sites More sharing options...
Danger-Mouse Posted February 26, 2017 Author Report Share Posted February 26, 2017 It's worth doing for all the usual reasons of running a company and offsetting costs and expenses against income. I dunno what you do, but if there's anything that you'll be doing as a consultant / contractor that could get you in to trouble or sued for negligence then the limited company will be a useful contractual firebreak - if what you do goes wrong you send the company down the river and walk away. I'd be setting up as a courier company. At present I'd be hiring a van and paying for it's insurance through the parent company although if circumstances allowed it would be nice to own my own van and sort out the insurance myself. I'm wondering though that if I'm paying for the hire and insurance that would be tax deductable? I guess that like many topics on here I'm going to need to take professional advice but I just wanted to see if I could take advantage of the knowledge of my fellow PWers before doing so. Quote Link to comment Share on other sites More sharing options...
jonesbach Posted February 26, 2017 Report Share Posted February 26, 2017 I believe (although I may be wrong) that as a company you can will pay corporation tax at 20% on any income. You can pay yourself upto the tax free threshold without paying any tax, then take upto the 40% threshold as a divident. This USED TO be tax free but I believe now you have to pay 7% tax on it. Also the first £5000 of your divident is tax free. Now as you would be paying 20% tax on all company income, does that mean as a company you MIGHT end up paying tax on your £12,500 wage (because the company paid tax on it to begin) where as this income as an individual would be tax free? Or have I worked that out wrong? Almost there, you'll only pay 20% tax on the profits not the income. As a director, you can pay yourself a wage (usually either up to your personal allowance e.g. £11500) or up to the NI threshold to avoid NI costs. This wage is a tax allowable expense so can be deducted from your income to reduce taxes. Quote Link to comment Share on other sites More sharing options...
discobob Posted February 26, 2017 Report Share Posted February 26, 2017 Not out your figures that you expect to earn from the courier business then book an hour with an accountant to discuss your options. You may be better with sole trader status or some other option as depending on your figures a Ltd may not be the best way to go to maximise your take home- And if it proves to be more successful than you thought it is easy enough to then go Ltd. Nowadays, there are a lot of pitfalls with being in a Ltd company with issues like IR35 (especially when supplying your services to just one company), divie tax, corporation tax, real time reporting and on and on.. This government is NOT a friend to small businesses even though (I heard) a figure that 90% of people are employed in small businesses Quote Link to comment Share on other sites More sharing options...
Danger-Mouse Posted February 26, 2017 Author Report Share Posted February 26, 2017 Not out your figures that you expect to earn from the courier business then book an hour with an accountant to discuss your options. You may be better with sole trader status or some other option as depending on your figures a Ltd may not be the best way to go to maximise your take home- And if it proves to be more successful than you thought it is easy enough to then go Ltd. Nowadays, there are a lot of pitfalls with being in a Ltd company with issues like IR35 (especially when supplying your services to just one company), divie tax, corporation tax, real time reporting and on and on.. This government is NOT a friend to small businesses even though (I heard) a figure that 90% of people are employed in small businesses That's sort of what I was enquiring for. Obviously all I want to do is maximise my income. Professional negligence isn't likely and neither is bankruptcy but if I can keep a few extra quid in my pocket and maybe end up with a few assets then that would be great. Quote Link to comment Share on other sites More sharing options...
fuzzypigeon Posted February 27, 2017 Report Share Posted February 27, 2017 I'm not sure whether you need to be careful of IR35 regs......do your research Quote Link to comment Share on other sites More sharing options...
Davyo Posted February 27, 2017 Report Share Posted February 27, 2017 (edited) Regarding Dividends, hope this helps (one important note however that dividends are under review ) band rate tax band dividend rate bands 2016-2017 band rate tax band dividend allowance 0% £1 - £5,000 ordinary rate 7.5% £5001 - £32,000 upper rate 32.5% £32,001 - £150,000 additional rate 38.1% £150,001+ Edited February 27, 2017 by Davyo Quote Link to comment Share on other sites More sharing options...
Danger-Mouse Posted February 27, 2017 Author Report Share Posted February 27, 2017 Thanks for the feedback guys. Quote Link to comment Share on other sites More sharing options...
Mice! Posted February 27, 2017 Report Share Posted February 27, 2017 Like others have said speaking to an accountant is a good idea, if your new to working for yourself you could be missing out on things that you can claim for. The other thing is remembering to put money aside for your tax bills next year its easy to think all is rosey then get a three or four grand bill, but if you set everything up right it can work out well. The other thing to think about is no sick pay if you had any and holidays cost you double because your not earning while your away. Good luck Quote Link to comment Share on other sites More sharing options...
Davyo Posted February 27, 2017 Report Share Posted February 27, 2017 Or set up a payment plan Customers can make payments in advance if they are up to date with their payments, and are having difficulty paying their Self Assessment bill on time. We call this a Budget Payment Plan (BPP). They can set up a direct debit online at www.hmrc.gov.uk by phoning 0300 200 3835 and at any time they can change the amount they pay cancel their payments BUDGET PAYMENT PLAN IS NOT FOR PREVIOUS BIIL (THATS TIME TO PAY AND DELT WITH THROUGH DEBT MANAGEMENT) Quote Link to comment Share on other sites More sharing options...
mowdy Posted February 27, 2017 Report Share Posted February 27, 2017 A couple of things to watch out for are employers liability insurance and also a,lot of banks do not like to lend money to a sole trader Ltd company. Also your accountant fees tend to go up as well. I used to be Ltd company(stonemason/builder) but came out of it 8years ago and its the best thing I ever did. If you want to limit your liability take,out a liability insurance policy it is far cheaper. Mowdy Quote Link to comment Share on other sites More sharing options...
Lloyd90 Posted February 27, 2017 Report Share Posted February 27, 2017 Almost there, you'll only pay 20% tax on the profits not the income. As a director, you can pay yourself a wage (usually either up to your personal allowance e.g. £11500) or up to the NI threshold to avoid NI costs. This wage is a tax allowable expense so can be deducted from your income to reduce taxes. Ah! Thats what I was missing! Thanks pal 👍🏻 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.