Accountants for Ltd company

RE: Accountants for Ltd company

Robin Grimmer — Tue, 26 Apr 2016 16:48:59 GMT

Not only that, but the new dividend tax is going to hurt small businesses and sole traders the most, as they are effectively being doubly taxed. Over the next 4 years Corporation Tax will drop to 17% which will save the big corporations a fortune.

RE: Accountants for Ltd company

Clive Ansell — Tue, 26 Apr 2016 16:38:18 GMT

[quote user="Mark Holmes"]Incidentally you cannot set up as a Ltd company to be tax efficient and then criticise others ie Politicians/Starbucks for doing likewise. [/quote]

I don't criticize or blame individuals for lawfully reducing there tax burden, who wouldn't. I am however critical of a tax system that is so ludicrously over complicated and unfair, and clearly weighted in favour of redirecting wealth towards those who are already very rich in times of belt tightening and so called austerity.

Even within our profession: 3 vets earning, say £50000, will pay very different amounts of tax depending up on whether they are PAYE, self-employed or Ltd Co. There should be fairness and a level playing field.

RE: Accountants for Ltd company

Robin Grimmer — Tue, 26 Apr 2016 14:48:58 GMT

[quote user="Bob Russell"]

Nick does know about the pension payments from Ltd company. he has been trying to get me to change the way my pension gets paid. My independent financial advisor wants a lot of money to do it. Apparently no real need for him to get involved but just not got round to doing it!

[/quote]

Yes he does. My advice to Neal would be instead of getting inappropriate advice from HMRC would be to speak to Nick - it's what you pay him for!

RE: Accountants for Ltd company

Bob Russell — Tue, 26 Apr 2016 13:53:11 GMT

RE: Accountants for Ltd company

Mark Holmes — Tue, 26 Apr 2016 13:28:30 GMT

No they are operating tax efficiently within the law - as are you. You have indicated that if you had the opportunity to do so you would take the steps they do. Don't get me wrong I was as tax efficient as possible myself. It is no good getting angry about people/corporations acting as you would if only you had the opportunity.

That said corporations don't pay tax people (shareholders) do. Starbucks pays no tax and consequently its shareholders pay more... and the reverse.

Tax is still taxed.

[quote user="Robin Grimmer"]

[quote user="Mark Holmes"]

Incidentally you cannot set up as a Ltd company to be tax efficient and then criticise others ie Politicians/Starbucks for doing likewise.

[/quote]

Got every right to be angry re the likes of Starbucks. It's a whole different ball game. In 2014 I paid more Corporation tax than Facebook!

[/quote]

RE: Accountants for Ltd company

Robin Grimmer — Tue, 26 Apr 2016 10:38:44 GMT

[quote user="Mark Holmes"]

Incidentally you cannot set up as a Ltd company to be tax efficient and then criticise others ie Politicians/Starbucks for doing likewise.

[/quote]

Got every right to be angry re the likes of Starbucks. It's a whole different ball game. In 2014 I paid more Corporation tax than Facebook!

RE: Accountants for Ltd company

Mark Holmes — Tue, 26 Apr 2016 05:27:31 GMT

Danbro they have been excellent and have a Ltd Co service. Possibly cost a little more but you'll make it up in tax savings. They keep you right and handle everything.

Incidentally you cannot set up as a Ltd company to be tax efficient and then criticise others ie Politicians/Starbucks for doing likewise.

RE: Accountants for Ltd company

Anthony Dennison — Mon, 25 Apr 2016 18:13:54 GMT

[quote user="Neil Wheadon"]Guess I could take on my wife in some capacity, now there's a thought.[/quote]

Put her on the books as an assistant because she answers the phone...

I have heard of partners in a large practice that is a Ltd company using this method to achieve a higher income without getting taxed more on it (I thni, i'm terrible with all this sort of stuff)

RE: Accountants for Ltd company

Robin Grimmer — Mon, 25 Apr 2016 16:21:59 GMT

[quote user="Neil Wheadon"]

[quote user="Clive Ansell"]Good idea, we could even form a union of locum veterinary surgeons, the ULVS (He said awaiting brickbats and general abuse)[/quote]

Change that to Locum Union of Veterinary sUrgeonS or LUV US for short

Arlo is thinking about how to achieve this, request went in a few days ago

Neil

[/quote]

It's beginning to sound like the People's Front of Judea!

RE: Accountants for Ltd company

Robin Grimmer — Mon, 25 Apr 2016 16:19:44 GMT

[quote user="Neil Wheadon"]

[quote user="Clive Ansell"]Not a area I know much about. Do pension payments come out of profits for a Ltd.co? If so do the payments then attract the tax back as payments into a personal pension would?[/quote]

I ran this idea past Nick (my accountant), 8 months ago and I don't think he'd thought about it.

First the fact

See https://www.gov.uk/workplace-pensions-employers

As a Ltd company you have to enrol your employee (yourself) into a pension scheme by 2018.

[/quote]

Not true as I've just done this. Sole director Ltd companies with no other employees are exempt from the Workplace Pension Scheme.

RE: Accountants for Ltd company

Robin Grimmer — Mon, 25 Apr 2016 16:17:46 GMT

[quote user="Neil Wheadon"]

[quote user="Robin Grimmer"]You don't pay any income tax or NI on a LTd Company![/quote]

I've just called the tax office and the employer allowance only applies for the first 2 years after you having set up the Ltd company, and has now been repealed. The explanation is that it was an encouragement for a company to take on more employees. As locums only having a company with a single employee (term was single director) we are liable for the NI after 2 years. Guess I could take on my wife in some capacity, now there's a thought.

[/quote]

As Ltd company your monthly salary should be £671. The threshold for paying Class 1 NI is £672, so there should be no NI to pay.

https://www.gov.uk/national-insurance/how-much-you-pay

And obviously no PAYE income tax, as it's below the tax threshold also.

RE: Accountants for Ltd company

Neil Wheadon — Mon, 25 Apr 2016 15:09:23 GMT

[quote user="Clive Ansell"]Good idea, we could even form a union of locum veterinary surgeons, the ULVS (He said awaiting brickbats and general abuse)[/quote]

Change that to Locum Union of Veterinary sUrgeonS or LUV US for short

Arlo is thinking about how to achieve this, request went in a few days ago

Neil

RE: Accountants for Ltd company

Clive Ansell — Mon, 25 Apr 2016 14:57:40 GMT

[quote user="Linda Filshie"]

[quote user="Neil Wheadon"]

Arlo is willing to host private groups on here

Would locums like to form a self help group?

I'm talking primarily about finances

Robin has some great nuggets of information and i've learnt a thing or two. It can't do any harm

Neil

[/quote]

I am going back to locuming after a couple of years in the same practice. I for one would welcome the support/knowledge pooling of such a group.

[/quote]

Good idea, we could even form a union of locum veterinary surgeons, the ULVS (He said awaiting brickbats and general abuse)

RE: Accountants for Ltd company

Clive Ansell — Mon, 25 Apr 2016 14:47:52 GMT

[quote user="Neil Wheadon"]

Saving

If the upper limit and paying 42.5 % dividend tax, you'd save £2550 (£1350 difference)

If at the mid limit of 27%, you'd save £1620 (£420 difference)

[/quote]

Actually, my calculation is better than yours. Your £6000 that is paid in to your pension pot, has no corporation tax, so saving 20% of £6000 = £1200; then no dividend tax so if a high rate payer you will save 32.5% of £6000 = £1950 = total saving of £3150

If a basic rate payer, then no dividend of 7.5% of £6000 = £450, plus the £1200 C tax saving = £1650

Seems like a sensible and very cunning indeed plan.

Only snag would be you don't have immediate access to the money until your pension fund matures, plus the low risk of a fund that tracks stock market (not scaremongering either, but my Standard life pension plan lost £20k in one week during the 2008 crash )

RE: Accountants for Ltd company

Neil Wheadon — Mon, 25 Apr 2016 13:57:47 GMT

I ran this idea past Nick (my accountant), 8 months ago and I don't think he'd thought about it.

First the fact

See https://www.gov.uk/workplace-pensions-employers

As a Ltd company you have to enrol your employee (yourself) into a pension scheme by 2018. This applies if you are paying £10.000 + per annum and as this is lower than the tax threshold, most locum companies will be doing this.

Conjecture, but did check this (remember I only set up the Ltd last year, so haven't had the accounts back for this yet, but my accountant thinks it's kosher)

If from the company you pay yourself the pension as a gross payment (as apposed to an employee paying it net and the provider claiming back the tax) you will in effect reduce the amount of dividend.

In my case I'm looking to pay £500/month into the plan, so this will take out £6000 / year as dividend which is an awfully big tax saving.

My AVIVA pension pot has consistently performed very well over the past 15 years, so scare mongering doesn't work in my head I'm afraid.

Trying to put the maths into context, for £6000/annum into the pension pot

Employed - paying own pension

You'd pay £4800, tax relief £1200 (you'd gain £1200)

Ltd company

Pay £6000 gross, no tax relief

Saving

If the upper limit and paying 42.5 % dividend tax, you'd save £2550 (£1350 difference)

If at the mid limit of 27%, you'd save £1620 (£420 difference)

Neil

RE: Accountants for Ltd company

Clive Ansell — Mon, 25 Apr 2016 13:44:33 GMT

Another area worth looking at is ultra low emission cars. Cars with CO2 emissions of 75g/km or less are eligible for a 100% first year allowance - meaning the whole value can be offset against tax. That said the threshold has been reduced, and few cars are now eligible, but electric, many hybrid, and a few conventional ones are.

RE: Accountants for Ltd company

Clive Ansell — Mon, 25 Apr 2016 13:40:36 GMT

[quote user="Neil Wheadon"]The area that I'm going to use (and I have pointed this out to the accountants) is pension payments. If the company pays the pension and there will be a legality to do this anyway you can significantly reduce/remove that 'stinger' With pension reforms meaning you can take your money at 55 (and get the tax back on 25%) it seems a winner especially if you are approaching 55.[/quote]

Not a area I know much about. Do pension payments come out of profits for a Ltd.co? If so do the payments then attract the tax back as payments into a personal pension would?

I suppose there is also an element of risk in using a pension plan as a short term investment tool, given that they rely on the stock market and the value of a fund could go down as well as up.

RE: Accountants for Ltd company

Neil Wheadon — Mon, 25 Apr 2016 13:14:06 GMT

[quote user="Robin Grimmer"]You don't pay any income tax or NI on a LTd Company![/quote]

I've just found this (George certainly had it in for us in the 2015 budget)

At Summer Budget 2015 the Chancellor announced that, in order for the Employment Allowance to continue to meet its objective of supporting employment, it would no longer be available to companies where the director is the sole employee from April 2016. This consultation seeks comments on the draft regulation to implement the new exclusion.

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479346/Technical_consultation_on_companies_excluded_from_the_Employment_Allowance.pdf

Neil

At home sorting out all the accounting issues that have arisen this year and getting there thanks in part to advise here.

I'm still unsure, having now found that crucial little button on the PAYE tool kit, if I'll be due any Employers NI, but looking at this, I can only conclude that I have an additional £200 year to pay after April 2016 (new tax year and beyond)

I'm musing to the country as a whole here, but it's useful I hope

RE: Accountants for Ltd company

Clive Ansell — Mon, 25 Apr 2016 12:40:46 GMT

[quote user="John Wessels"]

£61000 would be turnover.

deduct ALL your expenses, including wages, and you'll find cooperation tax to be considerably lower.

A good accountant will bring the business's profit down a lot.

[/quote]

Sorry, I didn't factor in tax deductible expenses. These are the same whether one if self-employed or Ltd co; mainly car use and travelling, professional fees, office, computers etc.

As a locum this a limit to tax deductible expenses, mainly travel, which even a good accountant cannot increase that much.

It remains a fact that once one is in the higher rate tax band, for a ltd co, profit will be taxed at 20% corporation tax and then 32.5% on any dividend taken.

RE: Accountants for Ltd company

Neil Wheadon — Mon, 25 Apr 2016 11:34:41 GMT

Hi John

The point that Clive is making is that the amount you can deduct in regards expenses is the same if you're self employed or a limited company, that is the core point

My understanding is that a Ltd was the way to go because you pay less tax once those expenses are deducted. The recent change is the increase in dividend tax which has stripped this advantage away.

If there is a legitimate way to bring this gap back please share

Neil

PS thanks for the screen shot, very very useful, but it took some finding!!

RE: Accountants for Ltd company

John Wessels — Mon, 25 Apr 2016 11:17:41 GMT

Clive:

£61000 would be turnover.

deduct ALL your expenses, including wages, and you'll find cooperation tax to be considerably lower.

A good accountant will bring the business's profit down a lot.

RE: Accountants for Ltd company

Neil Wheadon — Mon, 25 Apr 2016 09:17:31 GMT

[quote user="Alet Engelbrecht"]For example, one of the biggest expenses is travelling, which is deductible for any travel from your office, which is home. Work clothes can be deducted. Stationary, electronics, telephone to name a few. So by being careful and reducing your taxable income to as low as possible, you end up paying a lot less tax at the higher level.[/quote]

Clive will hopefully explain for self employed but I'm pretty sure that there isn't any difference in regards the big one which is mileage. (the little ones can be claimed for both anyway) With a Ltd company you can claim from home to business you're covering.

The area that I'm going to use (and I have pointed this out to the accountants) is pension payments. If the company pays the pension and there will be a legality to do this anyway you can significantly reduce/remove that 'stinger' With pension reforms meaning you can take your money at 55 (and get the tax back on 25%) it seems a winner especially if you are approaching 55.

I've always paid attention to the pension pot and will be increasing the payments now.

Neil

RE: Accountants for Ltd company

Alet Engelbrecht — Mon, 25 Apr 2016 08:39:02 GMT

[quote user="Clive Ansell"]The real stinger seems to be the higher dividend tax rate of 32.5% after already having paid corporation tax of 20%[/quote]

True and very well explained.

My understanding is that one of the other 'advantages' of the limited company lies in the fact that you are allowed more business deductions with a limited company than what you are allowed as self-employed, but please correct me if I am wrong.

For example, one of the biggest expenses is travelling, which is deductible for any travel from your office, which is home. Work clothes can be deducted. Stationary, electronics, telephone to name a few. So by being careful and reducing your taxable income to as low as possible, you end up paying a lot less tax at the higher level.

RE: Accountants for Ltd company

Clive Ansell — Sun, 24 Apr 2016 23:33:34 GMT

[quote user="robloxley"]

[quote user="Clive Ansell"]Basically the difference is due to paying dividend tax at 7.5%, after the first £5000 which is tax free, instead of class 4 NIC at 9%. Personal allowance, and tax deductible expenses are the same. income and corporation tax are the same 20% rate.[/quote]

Do the savings add up more once you're over the higher rate income tax threshold?

[/quote]

The reverse is true as far as I can tell, one would be better off self-employed as opposed to being a Ltd co. (Bear in mind I am not an accountant though)

Take annual earnings of £61000.

First £11000 personal allowance, no tax.

leaves £50,000 taxable income.

Self-employed: First £32000 taxed at 20% (=£6400) remaining £18000 taxed at higher rate of 40% (= £7200) NI at 9% on £35000 (=£3150), and 2% on £7000 (£140). Then NI class 2 at £2.80 per week (£146) . Total taxation = £17036.

Ltd co: 20% corporation tax on £50000 (£10000), no NI, first £5000 of dividends no tax. 7.5% div tax on first £32000 (=£2400) remaining £18000 taxed at the higher dividend tax rate of 32.5% (=£5850). Total taxation = £18250

The real stinger seems to be the higher dividend tax rate of 32.5% after already having paid corporation tax of 20%

RE: Accountants for Ltd company

Robin Grimmer — Sun, 24 Apr 2016 19:28:47 GMT

[quote user="Kelly Cremers"]

Hi,

I am currently going through the same process. I have been working as a locum for the past 4 years via an umbrella company and now starting a limited company.

I am using an online accountant firm. They have set up the company for me (took 24h, that is it), and I have signed up for their all-in accountant package. So far, I have been impressed with all the help and advice they have been giving me. I haven't started using it all yet, first contract booked for 11/05 so don't know yet how the online thing is going to work but it sounds easy enough.

There is a monthly fee for their all-in-one package but I admit that the price is really reasonable and I was paying my umbrella company the same (if not more) for a lot less really. So I don't feel that they are overcharging at all.

Their website is http://www.gorillaaccounting.com

Hope this helps and good luck.

Kelly C.

[/quote]

There's quite a useful guide to all the ins and outs of umbrella company, Ltd company on that website. It's a free download, you only need to provide an email address to register. Worth a read. (although it makes you sound as though you have to be Ltd Co to be on the flat rate VAt scheme which isn't the case).