Help needed with small Ltd budgeting

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Hi All hope everyone is doing ok. I started up a small Ltd electrician business last year and am trying to budget and monitor my both personal and business expenses to determine if this is sustainable and save me from getting into a financial black hole that i would struggle to get out of. I have calculated that my personal living expenses for the next year is likely to be around £20000 and my business expenses around £13000. What i would like to try to do is calculate a figure that i need to be earning each week to make this sustainable. Also how do i best calculate each week how much i should be seting aside for corporation tax each week. Abit lost with it in all honesty any help would be greatly appreciated. 

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By SXGuy
13th Apr 2020 10:51

Without sounding harsh. These questions should be directed to a paid professional. This forum is generally for accountants to discuss accounting matters and isn't a free advice service. If it was a simple question someone may help but the questions you've asked is something a paid professional would be happy to help with.

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Replying to SXGuy:
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By DaveS79
13th Apr 2020 11:32

Thanks for reply. Unfortunately still find it quite confusing what accountant has said so was trying to see if someone else might of been able to explain better

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Replying to DaveS79:
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By Accountant A
15th Jun 2020 20:26

p987t

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By Tim Vane
13th Apr 2020 12:21

Back of an envelope. You’ll need divs of at least £22,000 so that needs to be covered by your retained profits. That requires a profit before tax of around £27,000. Since your overheads are £13,000 you need a gross annual profit of £40,000. Assuming you can work 48 weeks a year that means earning a gross profit (i.e. revenue less any direct costs you incur on jobs) of around £850 a week.

That is a quick sketch. It is not the way I would recommend since it is not tax efficient and does not take into account other things. That is why you need a professional.

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Scalloway Castle
By scalloway
13th Apr 2020 12:28

You need to look at the rate you charge and how many hours you can work. Remember you won't start work at 8 am and finish at 5 pm. You need to factor in all the other things you will need to do in the course of a day, like getting material from the wholesaler, looking at jobs, taking your vehicle to the garage etc.

As an owner of a limited company the business will pay you a wage through PAYE. Traditionally small businesses like yours have been advised to pay a low wage and take out the bulk of profits as dividends. This can save you on NI payments but the present situation with corona virus has shown there is a downside.

I have never tried it but Free Agent bookkeeing software calculates Corporation Tax as you go.

https://www.freeagent.com/features/corporation-tax/

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Replying to scalloway:
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By Accountant A
15th Jun 2020 20:26

o8y t

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By DaveS79
13th Apr 2020 13:26

Thanks for all replies. Noted I really need to ask accountant to get clearer with me. I pay myself a salary of £702 a month

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Replying to DaveS79:
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By legerman
13th Apr 2020 13:59

DaveS79 wrote:

Thanks for all replies. Noted I really need to ask accountant to get clearer with me. I pay myself a salary of £702 a month

That would be a minimum salary based on paying no tax or ni (although the thresholds have gone up since) and you taking the remainder in dividends.

Is the salary of £8424 included in the expenses you mention?

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Replying to legerman:
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By DaveS79
13th Apr 2020 14:24

legerman wrote:

DaveS79 wrote:

Thanks for all replies. Noted I really need to ask accountant to get clearer with me. I pay myself a salary of £702 a month

That would be a minimum salary based on paying no tax or ni (although the thresholds have gone up since) and you taking the remainder in dividends.

Is the salary of £8424 included in the expenses you mention?

No this salary is just used to cover my personal living expenses.

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Replying to DaveS79:
Scalloway Castle
By scalloway
13th Apr 2020 15:33

If your target income is £33,000 per annum then you would need to earn £634.62 per week 52 weeks a year. If you allow yourself four non earning weeks for holiday, sickness etc then it becomes £687.50 per week in the weeks you work.

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Replying to scalloway:
ALISK
By atleastisoundknowledgable...
13th Apr 2020 19:04

scalloway wrote:

If your target income is £33,000 per annum then you would need to earn £634.62 per week 52 weeks a year. If you allow yourself four non earning weeks for holiday, sickness etc then it becomes £687.50 per week in the weeks you work.

So a nil% CT & IT rate? Nice.

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Replying to atleastisoundknowledgable...:
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By DaveS79
13th Apr 2020 20:38

atleastisoundknowledgable... wrote:

scalloway wrote:

If your target income is £33,000 per annum then you would need to earn £634.62 per week 52 weeks a year. If you allow yourself four non earning weeks for holiday, sickness etc then it becomes £687.50 per week in the weeks you work.

So a nil% CT & IT rate? Nice.

That's what my thoughts were. Do you have an idea on what my corporation tax and NI would likely be on top of this

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Replying to DaveS79:
Scalloway Castle
By scalloway
13th Apr 2020 22:04

At £702 per month there will be no NI

I worked out a set of figures thus

Sales.........................................................£36,540
Salary...........£8,824
Expenses...£13,000
PROFIT...................................................£14,716
Tax @19%..............................................£2,796
NET PROFIT avalable for dividend..£11.920

Tax on dividend is £744

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Replying to scalloway:
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By Matrix
14th Apr 2020 07:12

Tax on dividends would be less if the OP has room in his personal allowance.

There are also certain assumptions regarding the deductibility of expenses which could affect the corporation tax.

I suggest the OP asks his accountant in case any assumptions are incorrect.

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RLI
By lionofludesch
14th Apr 2020 06:41

£702 a month?

Surely that advice is two years old.

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