Is it worth going LTD?

[sparksburnout]

Come on then I can't resist it, why do you think you should get tax relief on private medical insurance premiums??

 

[Leesparkykent]

Can this be kept on subject please. The OP has asked a reasonable question and is looking for advice from members who are or have been in a similar situation.

 

[Octopus]

Well .... Maybe but we are sparks, not accountants

 

[Hellmooth]

Well .... Maybe but we are sparks, not accountants

He isn't asking the advice of an accountant though.......but that of fellow sparks who have went down this route......

 

[GMES]

Ok Lads let's move on and keep it on track please, we're supposed to help each other out here.

 

[Hellmooth]

It seems most threads get taken off track by irrelevant comments......

 

[Octopus]

He isn't asking the advice of an accountant though.......but that of fellow sparks who have went down this route......

Well ... so far nobody seems to have done the same!

 

[rolyberkin]

To get it back on track, I am in a similar position to you and am prepping for full out self employment in Oct 2017. Currently I am a sole trader but have a dormant Ltd company registered ready for when I go fully self employed. I am early doors so still have massive overheads so sole trader suits me. Ltd company has advantages of separating your business and private life. Check out www.bytestart.co.uk/limited-company-advantages.html

 

[akwoody2]

To get it back on track, I am in a similar position to you and am prepping for full out self employment in Oct 2017. Currently I am a sole trader but have a dormant Ltd company registered ready for when I go fully self employed. I am early doors so still have massive overheads so sole trader suits me. Ltd company has advantages of separating your business and private life. Check out www.bytestart.co.uk/limited-company-advantages.html

Thanks for the link, I'll take a look at lunch.

 

[Andy C]

This is an interesting topic. I too am in a very similar situation to woody. I am 54 and have a good pension giving me about 21.5k a year so am returning to the trade but don't want to start paying 40% tax so am trying to limit my earnings to no more than 20K for safety sake.

I too may decide to go Ltd if I decide to do it full-time again.

All info is greatly appreciated because the info and help I have had off here is invaluable.
So thanks guys and ladies it all helps.

 

[SparkyChick]

Hi akwoody2,

I went straight for limited company, but I did get advice from a couple of accountants before I finalised that decision.

The key drivers for limited were the separation of your business and personal financial affairs and the very obvious tax benefits. I was also advised (by the accountants, some potential customers and friends who run their own businesses) that a limited company has an improved image amongst customers simply because it's a traceable financial entity.

If you're looking to do commercial/industrial, you may also find that some companies won't deal with you if you're a sole trader. This is not based on my experience, it was advice I received from people in business (various forms).

There is additional baggage with a limited company in that you are required to submit accounts etc. every year, but a good accountant should handle that for you (at least that's why I'm paying an accountant because if all I had to do was keep track of money, I can do that easily enough myself with Excel). The forming of the company is easy enough, there are loads of company formation places on the internet and they all offer the same sorts of deals. Just be aware of things like registered address. To try and keep my home address off the public register (as much as possible) I use the formation company's registered office service, the problem with that is, my NAPIT assessor nearly ended up at the registered address in London (and when I first got it, TrustMark stated I was in London) as they specifically ask for the Registered Office Address. Total cost was about £150 for setting up the company (yes, you can get it cheaper, but I went for the full package with all the mail redirecting etc. because I wasn't sure about how it all worked). There is a potential hiccup in using the registered office of your formation company... the company registers are supposed to be available for inspection at the registered office. Companies house provides a means of specifying a different inspection address.

Oh and don't be surprised if you get asked to record specific things in your company registers. I had to have a board meeting with myself to approve my decision to use a particular bank (their application process specifically required me to record this decision - with specific wording - in the board meeting minutes and vote on it... was great until the end when to my surprise there was one vote for and one vote against ). Other things that have to go in the registers are things like share holding changes. So if you make your other half a director (obviously keeping the controlling majority yourself), then this has to be recorded and I think there is a financial transaction that has to take place. This is where it gets really murky and an accountant is required to advise on this sort of thing.

One of the downsides comes when you start getting setup with credit accounts with suppliers. Your newly formed business won't have any credit history where as you would as a sole trader because it's you (this is my understanding of it, anyone who knows better, feel free to correct it). This could be a problem although thus far it's not proven so for me. The only ones who were a bit picky were TradeUK who insisted on a direct debit payment approach rather than the usual invoice and pay.

Once the business is setup, you'll need to get a tax reference for it (and you'll end up making your accountant an agent for you so they can talk to HMRC on your behalf) and as you'll be employing yourself as a director, you need to register as an employer if memory serves. Don't worry about being an 'employer'. There is a lot of legislation around being an employer but because it's only you, you don't have to have all the H&S processes and such like in place and you don't have to worry about employers liability insurance (you can hardly sue yourself for negligence). You will also receive a personal tax reference if you haven't already got one (sounds like you may have) as once you are a director of a business, that's it, tax return hell time. So I setup in 2016, my first tax return will be due at the end of January I think, 2018. You may not be aware as well (I wasn't and I was shocked when I heard this given how often you hear about people and companies running up massive tax bills), that based on your tax return for a particular year (I think this is for the company tax only, but I could be wrong), HMRC will send you a bill and expect you to pre-pay an amount towards your next years tax bill.

It's highly likely you'll have been spending your own cash buying tools and equipment etc. before the business started trading. I've been advised that you can claim this back from the business as expenses, so keep full records. Same goes for training and travel. If you're using a vehicle you own, keep a full record of your business related journeys (mileage, to/from/date - again, this can include setup related activities before the business is trading) and then you can claim for your fuel, I think it's about 40p/mile for the first 10K (you can find details of the HMRC website).

And definitely, talk to more than one accountant. I talked to a firm and a local chap (who is fully registered). I received slightly differing advice from both and whilst he is slightly more expensive, he's going to be doing more for me (as all they would do was provide telephone help and take a bunch of spreadsheets from me at the year end and churn those to produce my books - which is no good if you cock it up early on and then have to try and figure out what actually went on 12 months down the line).

Sorry if you know this stuff, just figured I'd post all I can remember of starting up the business in case it's useful for others, but the overriding advice has to be talk to an accountant.

 

[Midwest]

This is an interesting topic. I too am in a very similar situation to woody. I am 54 and have a good pension giving me about 21.5k a year so am returning to the trade but don't want to start paying 40% tax so am trying to limit my earnings to no more than 20K for safety sake.

I too may decide to go Ltd if I decide to do it full-time again.

All info is greatly appreciated because the info and help I have had off here is invaluable.
So thanks guys and ladies it all helps.

If you don't mind me saying so, 20k turnover is quite optimistic in a first year of trading, unless you have some juicy work lined up.

 

[Andy C]

If you don't mind me saying so, 20k turnover is quite optimistic in a first year of trading, unless you have some juicy work lined up.

Thanks for the reply, that 20k max figure is so I don't start to pay tax at 40%.
My target for the first year is just to recover my start up costs which will be about 4k. Then for year 2 start working a bit more and then earn maybe up to 10k, the 20k is just a max limit.

I know it will be hard in my first year, but I have a few contacts who have promised me work.
One is a property management company with in excess of 100 rental properties.
Another is a smaller rental company with a few houses and small commercial units.
Lastly I want to focus on doing jobs for the elderly and vulnerable to ensure they get a good reasonably priced job done. So I will be putting a poster up at a place my wife who is disabled goes to for physic.

My 30 years as a police officer together with a DB check will assist me in helping my local community again and then I hope for a few referrals.I was particularly dismayed and disgusted by some frauds I saw against the most vulnerable people so want to restore some faith and provide a reliable friendly small scale service.

We will see how it goes, but the beauty is I don't need it to pay all the crucial bills.

Sorry for the rant.

 

[Octopus]

Above. Think you need to review tax rates as you are well behind the times.....

 

[Andy C]

Above. Think you need to review tax rates as you are well behind the times.....

Thanks for the reply.

I thought the 40% tax rate was anything you earn over about 43K.

Thats what I based it on and I get a 21k pension so that leaves me a total of 22k room which i don't have a hope in hell of reaching as i am not going to work full time.

What do you think the rate is?

 

[Midwest]

Sorry for the rant.

Not at all, seems like you have a plan. Think Murdoch is referring to the allowances you'll be able to incur against tax in your self employed earnings. An accountant will be able to advise.

 

[Octopus]

Thanks for the reply.

I thought the 40% tax rate was anything you earn over about 43K.

Thats what I based it on and I get a 21k pension so that leaves me a total of 22k room which i don't have a hope in hell of reaching as i am not going to work full time.

What do you think the rate is?

Ah ha..... So £21 k civil service pension, presumably you don't get the state pension yet?

For me to get a £21k index linked pension, I would need over £500k in as pension saved by me.....

 

[Andy C]

Ah ha..... So £21 k civil service pension, presumably you don't get the state pension yet?

For me to get a £21k index linked pension, I would need over £500k in as pension saved by me.....

Murdoch, I was lucky I started off as a apprentice in 1978, it was then a 5 year indentured apprenticeship. Then worked on as an electrician until 1985 when I became a bobby. Did 30 years front line and enjoyed it.
Got a good pension, They have now changed to a less better one but I was paying for all my first 20 years 11.5% salary then my last years it went up to 14.5%. Police pay the greatest pension contributions of all public sector workers. I suppose we pay a lot and get a decent pension at the end of it, if your still around. More and more are now leaving as they have become disillusioned sadly.

Thankfully as to my state pension I won't get that until 68 according to the new rules so thats another 13 years.

So I am trying some part time sparking to give me more hobby and holiday money whilst providing a reliable service I hope.

 

[Andy C]

Not at all, seems like you have a plan. Think Murdoch is referring to the allowances you'll be able to incur against tax in your self employed earnings. An accountant will be able to advise.

I have taken advice from an accountant and know that my start up costs and other things can be offset against my tax. so i could conceivably earn more if i wanted. However I don't want to go full time again or have the tail wagging the dog as the saying goes. Just do what is comfortably for me to do and keep my good lady happy.

 

[FatAlan]

Good luck Andy. I've 12 months to go till the 30 is up and like you are luck to sneak in with the old style pension. I currently work in fraud investigation and take it from me, Ltd companies are dead easy to set up ... all the best fraudsters hide behind them... most of them based in the City offering great investment deals in diamonds, rare earth metals, carbon credits you name it! You may even have been lucky enough to get an unprompted sales call from them!