CIS > PAYE > Setting up LTD.

[JDizzle]

Hi guys,

First post on the forum so go easy on me.

Ive been an electrician now for 12 years and started off as an apprentice and served my time under Lorne Stewart in Bristol. I left Lornes a year after coming out of my time and have been 'self employed' ever since (7 years).

It started off so well being under the CIS scheme but now being forced to go PAYE and use umbrella companies, is in my opinion, killing the enjoyment. How is everyone else finding it?

I am now considering setting up myself as a LTD company but Im a complete novice when it comes to the ins&outs and the pros and cons. Im just looking for a bit of advise really into what steps I should take to do this. Being stung for £100-200 NI every week is something I just cant comprehend and to be totally blunt im looking for the best way to make sure most of the £'s I earn stay in my pocket!

Cheers

 

[Leesparkykent]

Hi guys,

First post on the forum so go easy on me.

Ive been an electrician now for 12 years and started off as an apprentice and served my time under Lorne Stewart in Bristol. I left Lornes a year after coming out of my time and have been 'self employed' ever since (7 years).

It started off so well being under the CIS scheme but now being forced to go PAYE and use umbrella companies, is in my opinion, killing the enjoyment. How is everyone else finding it?

I am now considering setting up myself as a LTD company but Im a complete novice when it comes to the ins&outs and the pros and cons. Im just looking for a bit of advise really into what steps I should take to do this. Being stung for £100-200 NI every week is something I just cant comprehend and to be totally blunt im looking for the best way to make sure most of the £'s I earn stay in my pocket!

Cheers

Booking an appointment with an accountant would be a good start. There are ways of taking a low wage and being paid dividends etc. A good accountant can advise you on all this and form the company etc for you.

 

[Octopus]

Hi guys,

First post on the forum so go easy on me.

Ive been an electrician now for 12 years and started off as an apprentice and served my time under Lorne Stewart in Bristol. I left Lornes a year after coming out of my time and have been 'self employed' ever since (7 years).

It started off so well being under the CIS scheme but now being forced to go PAYE and use umbrella companies, is in my opinion, killing the enjoyment. How is everyone else finding it?

I am now considering setting up myself as a LTD company but Im a complete novice when it comes to the ins&outs and the pros and cons. Im just looking for a bit of advise really into what steps I should take to do this. Being stung for £100-200 NI every week is something I just cant comprehend and to be totally blunt im looking for the best way to make sure most of the £'s I earn stay in my pocket!

Cheers

Are you sure its just NI?

 

[derek]

Are you doing agency work? The new agency workers regulations are screwing many trades over, I ended up going limited, it cut out the payment agency fees as well as I could just invoice the agency as usual.Probably best if you speak to an accountant to check it is the right thing for you if you can't get your head around all the tax and legal implications. It is easy and cheap enough to set up your own ltd co. Don't know how much an accountant would charge, but if you know one sound them out (my brother is chartered so gave me some free pointers).

 

[IrishSpark]

Are you sure its just NI?

id say he's sure. The parasites that are umbrella companies make you pay both employer and employee NI. An absolute disgrace of a scam brought in to shaft those in construction even more!!

 

[JDizzle]

Booking an appointment with an accountant would be a good start. There are ways of taking a low wage and being paid dividends etc. A good accountant can advise you on all this and form the company etc for you.

I have booked an appointment with my accountant next weekend. I know last time I spoke to him about it he advised me against it so hopefully I can get more sense out of him this time round!

Are you doing agency work? The new agency workers regulations are screwing many trades over, I ended up going limited, it cut out the payment agency fees as well as I could just invoice the agency as usual.Probably best if you speak to an accountant to check it is the right thing for you if you can't get your head around all the tax and legal implications. It is easy and cheap enough to set up your own ltd co. Don't know how much an accountant would charge, but if you know one sound them out (my brother is chartered so gave me some free pointers).

Yeah its all agency work unfortunately I should of stated that in my OP sorry.
My accounts fees go up 4 fold for him to cover the paper & legal side of things. I think all in all it will cost me £800 for my accountant to cover it, which sounds a lot but in the long run id be paying a lot more in NI.

Are you sure its just NI?

id say he's sure. The parasites that are umbrella companies make you pay both employer and employee NI. An absolute disgrace of a scam brought in to shaft those in construction even more!!

Irish hit the nail on the head. It is a disgrace. I mean going from £12 p/m class 2 to ~£600 p/m has nigh on crippled me financially. It also doesnt help that none of the agency rates have improved to cover the influx of NI.

 

[Leesparkykent]

I have booked an appointment with my accountant next weekend. I know last time I spoke to him about it he advised me against it so hopefully I can get more sense out of him this time round!



Yeah its all agency work unfortunately I should of stated that in my OP sorry.
My accounts fees go up 4 fold for him to cover the paper & legal side of things. I think all in all it will cost me £800 for my accountant to cover it, which sounds a lot but in the long run id be paying a lot more in NI.




Irish hit the nail on the head. It is a disgrace. I mean going from £12 p/m class 2 to ~£600 p/m has nigh on crippled me financially. It also doesnt help that none of the agency rates have improved to cover the influx of NI.

Listentotaxman Guides: Contractors- LTD Company v Umbrella - The Free UK PAYE Salary Calculator Wage Calculator Income Tax Calculator 2014 / 2015

A brief summary with examples.

 

[JDizzle]

Listentotaxman Guides: Contractors- LTD Company v Umbrella - The Free UK PAYE Salary Calculator Wage Calculator Income Tax Calculator 2014 / 2015

A brief summary with examples.

Thats great thank you

 

[Deleted member 26818]

There are still a few Agencies out there that do CIS.
Fastrack and PCR, are two that I know of.

 

[uksparks]

If your NIC is £600 per month, you are making a f************* lot of money!

 

[Octopus]

If your NIC is £600 per month, you are making a f************* lot of money!

hum.... Umbrella set ups means he has to pay employer NI too, unlike being SE, sole trader or Ltd

 

[happydundee]

By going Ltd, there are lots of ways to reduce your tax liability. Paying yourself minimum wage. Putting wife on the books as bookkeeper on minimum wage.
I get paid 10k a year, and pay my wife 10k a year. I then take a dividend from the company. You can also use vehicles that are classed as company vans such as crew cab pickups as opposed to cars.
You need a good accountant who understands all the rules.
It's worth it at the end of the year, when you see your tax bill.

 

[IrishSpark]

If your NIC is £600 per month, you are making a f************* lot of money!

Not really, £1000 a week under umbrella will leave you paying that.

 

[Octopus]

By going Ltd, there are lots of ways to reduce your tax liability. Paying yourself minimum wage. Putting wife on the books as bookkeeper on minimum wage.
I get paid 10k a year, and pay my wife 10k a year. I then take a dividend from the company. You can also use vehicles that are classed as company vans such as crew cab pickups as opposed to cars.
You need a good accountant who understands all the rules.
It's worth it at the end of the year, when you see your tax bill.

That will ONLY work if she doesn't have a job!

 

[happydundee]

That will ONLY work if she doesn't have a job!

She does have job, she is my bookkeeper. My son has just got his NI number, so he is also getting 10k a year from June.

Dividends are the best way to take money out of company though, no NI contributions and tax is only 20%.

Company pension contributions are also a good way to reduce Tax, if you can wait till you are 55, to get your hands on the cash.

 

[Octopus]

She does have job, she is my bookkeeper. My son has just got his NI number, so he is also getting 10k a year from June.

Dividends are the best way to take money out of company though, no NI contributions and tax is only 20%.

Company pension contributions are also a good way to reduce Tax, if you can wait till you are 55, to get your hands on the cash.

I meant another "proper" job paying tax!

You can't just "pay" your son £10K for doing nothing!

And what then - waste it - and pay the tax taking it out?

 

[happydundee]

I can pay him 10k for working during the summer holidays.

Who knows what tax laws will be in place when I am 55. I have paid no tax putting the money into a pension. I don't know what my financial situation will be in 10 Years. It's all about limiting your tax liability, and spreading your assets around

 

[Octopus]

I can pay him 10k for working during the summer holidays.

Who knows what tax laws will be in place when I am 55. I have paid no tax putting the money into a pension. I don't know what my financial situation will be in 10 Years. It's all about limiting your tax liability, and spreading your assets around

And then HMRC come and inspect you, and ask why you are paying your son well above the odds, and therefore reducing YOUR liability....... and then they start going back though your books for 5 years and you land with a big bill!

 

[JDizzle]

If your NIC is £600 per month, you are making a f************* lot of money!

Ha god I wish! Im working nigh on 50 hours a week and taking home £550. The rates in Bristol are pathetic to say the least.

By going Ltd, there are lots of ways to reduce your tax liability. Paying yourself minimum wage. Putting wife on the books as bookkeeper on minimum wage.
I get paid 10k a year, and pay my wife 10k a year. I then take a dividend from the company. You can also use vehicles that are classed as company vans such as crew cab pickups as opposed to cars.
You need a good accountant who understands all the rules.
It's worth it at the end of the year, when you see your tax bill.

I want to follow the rules as much as possible as cant be arsed with the grief. If my wife is currently employed, can I still pay her to be my secretary? Id also like to avoid giving her money if possible!
My accountant is pretty decent, ive gotten a better picture of the whole LTD situation now thanks to the forum so i guess i can say mission accomplished and thank you!

 

[happydundee]

And then HMRC come and inspect you, and ask why you are paying your son well above the odds, and therefore reducing YOUR liability....... and then they start going back though your books for 5 years and you land with a big bill!

Everything I do, is within the tax laws. HMRC cannot tell me how much I pay people. I was audited 2 years ago, and was a clean bill of health.

I don't do homers, everything goes through the books. I have no problems with HMRC.

I do everything possible within the rules to reduce my tax bill.

 

[happydundee]

Ha god I wish! Im working nigh on 50 hours a week and taking home £550. The rates in Bristol are pathetic to say the least.



I want to follow the rules as much as possible as cant be arsed with the grief. If my wife is currently employed, can I still pay her to be my secretary? Id also like to avoid giving her money if possible!
My accountant is pretty decent, ive gotten a better picture of the whole LTD situation now thanks to the forum so i guess i can say mission accomplished and thank you!

There is little point in paying your wife, if she already has a job, as she will pay tax at 20% on her 2nd job with you. Unless you need to keep below the 40% band.

 

[Octopus]

Everything I do, is within the tax laws. HMRC cannot tell me how much I pay people. I was audited 2 years ago, and was a clean bill of health.

I don't do homers, everything goes through the books. I have no problems with HMRC.

I do everything possible within the rules to reduce my tax bill.

Hum.... Say you make £40k profit, you pay your wife £10k for doing your books, and you pay your son £10 k for a few weeks work. Which leaves you with £20k for 12 months work.

Can I be a fly on the wall when you explain this to HMRC?

 

[plugsandsparks]

Its true there are more "options" about how you arrange your affairs if you are Ltd. I would say though that how you arrange this will be personal to you rather than one size fits all. That's why you either employ a good accountant who understands small businesses and director / employee, or learn for yourself.. For example i pay myself less than the tax threshold because if i pay myself 10K i will pay NI. Now because of my age , paying any further Nis are a waste of money. However you could pay yourself an amount which triggers NI at the lower amount and as such this will count towards a pension. My wife works in her own right and is a shareholder, our divs are taken to keep tax at 20% rather than super tax. i.e. lots of variables and £800 is OK if he gives you both personal and business accounts

 

[happydundee]

Hum.... Say you make £40k profit, you pay your wife £10k for doing your books, and you pay your son £10 k for a few weeks work. Which leaves you with £20k for 12 months work.

Can I be a fly on the wall when you explain this to HMRC?

I wouldn't do the type of work I do for 40k profit. I mainly work offshore and marine work away from home.

 

[Leesparkykent]

You can make your wife a shareholder so she can be paid a dividend equal to her share. Just means she sits on the board as a share holder (doesn't have to be an employee)

 

[Octopus]

I wouldn't do the type of work I do for 40k profit. I mainly work offshore and marine work away from home.

So how are you going to explain that to HMRC when your son doesn't go with you?

 

[derek]

He's just following the example of every Tory politician and most Labour ones who employ their kids and wives as researchers. Every accountant recommends it if your wife isn't working, so if is not against the law why shouldn't he, all the multi national companies use loopholes in tax law for their advantage so why shouldn't we?

 

[Deleted member 26818]

Offshore and marine work, I hope there's no duck house involved?

 

[happydundee]

So how are you going to explain that to HMRC when your son doesn't go with you?

There is nothing to explain. HMRC can do nothing. I am following the rules. I can employ my son for 1 day and pay him 10k. As long as he doesn't earn any more money, he doesn't pay tax.

There is no grey area, and it doesn't matter that a tax inspector sees me paying 3 people in my house 10k. That's the rules. That is the point in being Ltd.

 

[Octopus]

There is nothing to explain. HMRC can do nothing. I am following the rules. I can employ my son for 1 day and pay him 10k. As long as he doesn't earn any more money, he doesn't pay tax.

There is no grey area, and it doesn't matter that a tax inspector sees me paying 3 people in my house 10k. That's the rules. That is the point in being Ltd.

Which directly contradicts what my accountant says......

 

[Robert Turnbull]

Which directly contradicts what my accountant says......

What does he say??