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Sole Trader - help deciding to go limited or not?

I need some more pointers/ info/ advice please

Didn't find your answer?

I think given lower corporation tax rates versus personal taxation this would normally be a no-brainer.

I know there are other pro/ cons particularly more paperwork, public accounts and less flexiblity on taking money out of the business but Im still not clear on best way to move forward particularly as a car purchase/ lease decision is complicating matters.

So my questions are:

1.  Before I speak to an accountant, where's best place for more info and the best caluclator for sole trader vs limted company taxation?

2. Given that I need say £2.5 k a month for personal outgoings can I do that with a £11k salary and rest monthly or quarrtely dividends?

3. Car Purchase or Lease - Currently Im considering PCP for a new car...but wondering which would be best if I go limited? Seem like leasing is £125-150 a month more (given below) but maybe tax advantages outweigh that?

- £15k deposit/ part ex on £40k car and 10k of that is on a credit card for 4 years at 0%

- 130 CO2 emmissions so will qualify for 18% capital allowance.

-  appoc 15,000 miles a year (around 10,000 business)

4. I currently on FRS for VAT but Im told its likely this may not be worth continuing with for forthcoming tax year. 

Help?

 

 

 

 

 

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Replies (27)

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RLI
By lionofludesch
23rd Jan 2017 17:44

Wow - that's a lot of information you're needing.

One thing that's knocked it on the head a little bit is that your average self employed bloke paid 20% tax and 9% NI, whereas a company only paid 20% tax. Now, on top of that, you're going to need to pay 7½% dividend tax so the two aren't so far apart as they were. If you're a higher rate taxpayer, the dividend tax is 32½%. On the other hand, the Chancellor claims that Corporation Tax rates will fall over the next few years.

You carefully don't say how much you make - just what you need ...... if you're only wanting £30k, what happens to any excess? Will you be wanting to access that now or some point in the future ?

I hadn't thought about it till now but, as the NI rate drops to 2% for employees, there must be a point where self employed tax + NI is overtaken by director tax + dividend tax.

Thanks (1)
Replying to lionofludesch:
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By bigdaddy
23rd Jan 2017 19:00

EXCESS OVER WHAT I NEED - IM SURE AT SOME POOINT I WOULD WANT ACCESS TO SOME OF IT BUT UNTIL THEN IT CAN BUILD UP AS RESERVES.

CURRENTLY (ESTIMATED):
T/O : £170K PA
GROSS PROFIT: £78K
NET PROFIT: £65K

PROJECTED FOR 17/18
T/O : £265K
GROSS PROFIT: £165K
NET PROFIT: £135K

IS THAT HELPFUL?

ISNT THE DIVIDEND TAX ABOUT 18% UP TO APPROX 43,000 OF TAXABLE INCOME?

AND ISNT THAT TAXED TWICE - ONCE AT 20% FROM PRE TAX PROFIT AND THEN AGAIN AS A DIVIDEND?

SO CONFUSED!

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Replying to bigdaddy:
By mrme89
23rd Jan 2017 19:16

At that level of income, you ought to be paying for advice.

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Replying to mrme89:
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By bigdaddy
23rd Jan 2017 22:11

THANKS FOR YOUR HELP.

I AGREE. AS I SAID ABOVE "BEFORE I SPEAK TO AN ACCOUNTANT..."

I THINK ITS IMPORTANT TO BE WELL INFORMED FOR EG, I ALWAYS DO MY OWN ACCOUNTS/ RETURNS BUT FOUND AN ACCOUNTANT WHEN I REGISTERED FOR VAT.

SUBSEQUENTLY I DISCOVERED THROUGH MY OWN RESEARCH THAT COULD SAVE AROUND £5K A YEAR ON THE FLAT RATE SCHEME AND DO ANNUAL RETURNS (NOT QUARTERLY) SAVING MORE VALUABLE TIME AND MONEY.

IM MORE THAN HAPPY TO PAY AN ACCOUNTANT (OR ANY PROFESSIONAL OR TRADESMAN OR ANYONE) BUT AM JUST LOOKING FOR SOME HELP BEFORE I DO SO.

THANKS.

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Replying to bigdaddy:
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By Cheshire
23rd Jan 2017 22:41

Can you please stop shouting- take your caps lock off before you type.

It's all well and good and very commendable that you want to know a bit more chapter and verse with regards to the financials for your business BUT how do your know your accounts and tax are right? Are you seriously suggesting you have managed to learn what these guys on here have taken anything up to 10 years to get to their Chartered status.

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Replying to Cheshire:
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By bigdaddy
24th Jan 2017 00:47

Of course Im not suggesting that. I mean that would be hugely arrogant. And if I thought that I wouldnt be asking for help.

As regards my returns my affairs have been relatively simple (and as an ex-finacial adviser and ex-stockbroker) I have felt capable of lets say at least basic competency.

What Im saying is that I need some help. I think you might agree that some professionals are better than others and I just want to consider all the information so that I feel secure in my dealings with my accountant (whoever that's going to be).

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Replying to bigdaddy:
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By Cheshire
24th Jan 2017 08:52

bigdaddy wrote:

Of course Im not suggesting that. I mean that would be hugely arrogant. And if I thought that I wouldnt be asking for help.

As regards my returns my affairs have been relatively simple (and as an ex-finacial adviser and ex-stockbroker) I have felt capable of lets say at least basic competency.

What Im saying is that I need some help. I think you might agree that some professionals are better than others and I just want to consider all the information so that I feel secure in my dealings with my accountant (whoever that's going to be).

Basic competency is now all that is required to create a set of Accounts - oh gents why the hell do you spend years learning this stuff? Just think of all the fun you missed out on when you were busy studying. Its clearly why pinkpants is now so easy!

If you want to feel secure in dealing with your accountant then ask questions about how to feel secure in dealing with your accountant, research them, check with governing bodies, get recommendations blur blur blur NOT ask a whole bunch of questions expecting a freebie answer.

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Replying to Cheshire:
RLI
By lionofludesch
24th Jan 2017 09:20

Cheshire wrote:

Basic competency is now all that is required to create a set of Accounts - oh gents why the hell do you spend years learning this stuff?

Is it because we want to avoid making the same crass errors we see advertised on this forum on a regular basis ?

Thanks (1)
Replying to bigdaddy:
RLI
By lionofludesch
24th Jan 2017 08:59

bigdaddy wrote:

ISNT THE DIVIDEND TAX ABOUT 18% UP TO APPROX 43,000 OF TAXABLE INCOME?

AND ISNT THAT TAXED TWICE - ONCE AT 20% FROM PRE TAX PROFIT AND THEN AGAIN AS A DIVIDEND?

SO CONFUSED!

No.

Yes. Sort of.

Thanks (1)
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By zebaa
23rd Jan 2017 18:38

1 - excel
2 - yes, but...
3 - it's a toss up. It depends on mileage, repairs etc etc.
4 - how do you expect an answer to this, given the information - none - you provide ?

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Replying to zebaa:
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By bigdaddy
23rd Jan 2017 18:51

FIRSTLY THANKS FOR YOUR HELP

SECONDLY, IF YOU ARE HAPPY TO LET ME KNOW WHAT INFO IS NECESSARY I WILL SUPPLY IT NO PROBLEM.

THIS, CLEARLY, IS NOT MY AREA OF EXPERTISE AND SO PLEASE FORGIVE MY INEPTITUDE

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Replying to bigdaddy:
By Ruddles
23rd Jan 2017 20:02

We hear you - no need to shout.

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Replying to bigdaddy:
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By Cheshire
23rd Jan 2017 20:04

[quote=bigdaddy]

SECONDLY, IF YOU ARE HAPPY TO LET ME KNOW WHAT INFO IS NECESSARY I WILL SUPPLY IT NO PROBLEM.

Perhaps a signed engagement letter and a payment up front.

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Replying to Cheshire:
Hallerud at Easter
By DJKL
23rd Jan 2017 20:07

Also remember your MLR obligations.

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Replying to DJKL:
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By Cheshire
23rd Jan 2017 20:14

Oh gawd - that wasnt an offer to take him on ;-)

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Replying to Cheshire:
Hallerud at Easter
By DJKL
23rd Jan 2017 20:22

Well, a verbal contract.......

(Though of course it was not verbal- strange how I now view posting online as talking, maybe I should spend less time on here)

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Replying to DJKL:
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By Cheshire
23rd Jan 2017 20:44

Offer rescinded. Did you not see the very small print?!!

Ha, know what you mean especially at this time of year. I may have occasionally responded to my PC when I've read some of the stuff on here. Certainly giggled a lot, or been stunned to silence (and that doesn't happen often!!) at some of the responses, especially from a certain bunch.

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Replying to Cheshire:
By cheekychappy
23rd Jan 2017 20:51

Guys do your flirting elsewhere, there's a serious thread going on apparently.

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Replying to cheekychappy:
Hallerud at Easter
By DJKL
23rd Jan 2017 21:56

You should not take your impatience to insult someone out on me, I am already feeling a little frayed and have now developed full blown last week syndrome and it is not yet the last week. I am also paranoid that the cold (Flu-it was flu, honest) that laid me low a week past Friday is going to return in the final week to really make me miserable.

As a list I now have:

1. A need to talk with a partner in another firm (she acts for a partner in a partnership I act for) but she has gone on holiday until Wednesday-what accountant gets a holiday in January!

2. I await data from A N Other who does not understand urgent.

3. I have another who when asked for a P60 or P45 for 2015/2016 sent me a September 2016 P45, at least next year will be easier.

4. My usual last gasp client is done and lodged- after 5 years of being last they finally gave me the records in December before Christmas- something is not right with the world.

I can safely say I am now sitting mainly twiddling my thumbs (or chewing their nails) when most years I am reasonably happy and sanguine re the whole process by this time.

I think I must be becoming the accounting equivalent of Inspector Dreyfus.

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Replying to DJKL:
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By Cheshire
23rd Jan 2017 22:26

Oh if you are planning on man flu I'm going to stop flirting and start with cheekychappy instead, especially with those pants. Although I don't want to deter cheeky's comments elsewhere as they are providing me with a very much needed giggle fest.

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Replying to Cheshire:
Hallerud at Easter
By DJKL
23rd Jan 2017 22:39

Well if you must, but he will just play hard to get for a bit then run away to the sin bin for a few weeks when he tires of you; it is obvious you have been seduced by his Rebel without a Cause, bad boy attitude; it will end badly.

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Replying to DJKL:
By cheekychappy
23rd Jan 2017 23:42

No I won't. I'm easy.

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Replying to DJKL:
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By bigdaddy
24th Jan 2017 00:51

Is that a joke? I hope so! Ha ha. Every single sale goes through the books. Its not exactly Narcos!

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Replying to Cheshire:
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By bigdaddy
24th Jan 2017 00:55

This would be easily arranged if you were happy to help but I dont think you have the personal qualities Im looking for in a long term business relationship.

Best of luck though.

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Replying to bigdaddy:
Stepurhan
By stepurhan
24th Jan 2017 08:16

bigdaddy wrote:

This would be easily arranged if you were happy to help but I dont think you have the personal qualities Im looking for in a long term business relationship.

Best of luck though.

Took you longer than most.

The "You've lost the chance to be paid later by not giving advice for free now" is a classic freeloader phrase. Good to see the traditions being kept up.

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Replying to stepurhan:
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By Cheshire
24th Jan 2017 08:46

Think I will be sleeping easily tonight - thats a manage out before you take them on type! Methinks he doesnt like strong minded women as well as not wanting to pay professionals to get professional advice but instead use those same professionals to try to get it for free?

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Replying to Cheshire:
By cheekychappy
24th Jan 2017 09:18

Cheshire wrote:

Think I will be sleeping easily tonight

I've pulled. Get in!

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