Self Employed or Limited?

[Spazz]

The big question I have at the moment is do I stay S/E or go limited?

This is the situation:
Poor Credit Score
No chance of credit with suppliers (staying S/E)
Partner has some debts (which have now been joined to us both)
Going through court action at the moment for custody of my children (not going into detail)
Renting a flat
Van and Tools Owned outright

 

[SPARTYKUS]

Hello Nick, Nick here

I went Limited 4.5 years ago. I was scare mongered into it and it seemed a good idea at the time, limited liability if anything goes wrong, etc etc. But I didn't want to do the (more complicated) accounts. Up tillthem I did all my own accounts and self assessment returns for 10 years.

The cost of the accountant has been enourmous. Maybe 800+ a year. And he's a good bloke and got me loads of work.... but at the moment I am only part time so the accountancy bill has suddenly become the biggest single cost to me each year!

Now I believe you can do it yourself as a limited company (not when its a large company making millions). There is confusion over this but the general rule I am getting is .... you can do it. But its more complicated. I plan to this year. If I can stay away from the beer fridge.

So on the plus side of Sole Trading, accounts are easy and cost ... nowt but if it really went t*ts up, your house, your wifes car, everything is linked to the thing thats gone t*ts up.

Whereas Limited .... it isn't. For example your house will not have to be sold to pay for the compensation someone is successfully sueing you for. (a bit of a fabricated longshot but ....)

Apparently there may be a tax advantage if limited too, but only if you're making loads.... Taxes are taxes ... not really a way round them

just a few thoughts typing fast, looking after kids (my MAIN job, electricianising is just a hobby !!!)

 

[needasparks]

Don't think your credit will get better by going Ltd at wholesalers as your score would be even lower as you can't get chased for the money.
On that score you would be better using a small wholesaler as much as you can and pay over the counter for them to get to know you, keep asking for quotes on as much as you can,even if you don't get it from them this brings you nto their attention and think they may be losing work and more likely to get an account off the back of it, once you have them you can get one elsewhere off the back of it.
With regards to s/e or Ltd alot will depend on your turnover and profit/loss and only your accountant can advise on this which would be better for you. have a chat to them or if your doing your returns yourself go and see one you do need one, anyone thinking their saving money not having one needs to know all the things you could be claiming for as you may be missing on loads.
If your one-man-band and low turnover I would think self employed would be better for tax reasons and claiming,

 

[Spazz]

Thanks for your advice.

I have a cash account with CEF as they are the closest to me - get the same rate but cash on collection of parts.
I have a ridiculous low credit score - I merged my credit with my partner a few years back - worst thing I did!

I dont have an account at the moment, so cant go to them!

The thing that spartykus said about doing your own accounts when your limited is a new for me - so will look a bit more into that as the account is the only thing pushing me away from the limited at the moment.


My turnover: £20K per year
My Profit: £10K per year

I am not expecting to make much as mine and my partners disposable income must be below £8K to get legal aid.

Legal costs already upto £69K each but expecting them to go to £100K each before this is all sorted out!

As you may guess I am not working much at all (new start up in Jan) hence why I was thinking of going limited so I could sign off as much as I can as in fuel, etc and pay myself a low wage if I get a bit ore work in and starting to go over the £8K limit.

Anyone else in a similar situation who has already made their mind up would be great to hear from

 

[needasparks]

What you should take on board with Ltd is you may well be paying yourself a low wage but the company still has to pay tax also, so you don't get away with it. If you start to spend the company money because you don't earn enough(pay yourself) then you will be charged tax on all the money you draw over your wages as you are effectively borrowing money from the company without being taxed on it.
Hope that makes sense.

 

[Spazz]

I know exactly what you mean but at the moment tax is the least of my worries.

Final hearing is in September/October this year so untill the I need to keep my income to the bear minimum - after that I can increase my wages as I wont have legal aid - reducing the tax the business has to pay.

As the personal allowance is £8,2K I could pay myself just over and have a low tax bill come new year.


Out of interest does a ltd company have to have an employee or could I be contracted by the business to run it (on a S/E basis) meaning I do my own tax? - just a though

 

[needasparks]

I think you should just remember HMCR are not idiots and a company has to have a director that is paid so you won't escape his claws.
Thing is being paid only 8K even they know you can't survive on that so you will get inspected bigtime.
Ask a Financial pro before you decide mate.

 

[SPARTYKUS]

Nicolas Owen, another thought, I had my first child and was sole trader. No paternity pay.

2nd one i had 2 weeks off & got £216 quid off t'government

 

[Spazz]

Thanks needasparks

I need a disposable income of less than £8K.

The things that get taken into account are:
Council Tax
Rent
Personal allowance (£300 per month)

All these get taken off the income of the household and that is the disposable income - must be less than £8K.


All the financial Pros around here charge and I cant afford to go and see them

 

[Spazz]

Nicolas Owen, another thought, I had my first child and was sole trader. No paternity pay.

2nd one i had 2 weeks off & got £216 quid off t'government

Your lucky -


S/E with my 1st - no Paternity Pay
Employed for my 2nd - no paternity pay - back to work within 48hrs of him being born - just started a new job and the employer was a b******