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  • FIRST POST
    • JamesFuller
    • By JamesFuller 13th Jan 18, 3:09 PM
    • 67Posts
    • 55Thanks
    JamesFuller
    Full time vs Self-Employed. Am I better off now?
    • #1
    • 13th Jan 18, 3:09 PM
    Full time vs Self-Employed. Am I better off now? 13th Jan 18 at 3:09 PM
    Hello all,

    Just wondering. Recently I started my own business for the first time and wondering how much better off I am (if at all).

    In my previous full-time job I earned £50,000 a year.

    Now I earn £400 a day as a self-employed person through my LTD company and expected to work around 200 working days a year. The contracts will be outside IR35.

    My claimable expenses are roughly £10,000 a year.

    There are calculators out there which suggest I am better off, but from real experience and maybe from similar people here in similar positions if this is good?
Page 1
    • mr_munchem
    • By mr_munchem 13th Jan 18, 3:58 PM
    • 39 Posts
    • 10 Thanks
    mr_munchem
    • #2
    • 13th Jan 18, 3:58 PM
    • #2
    • 13th Jan 18, 3:58 PM
    Just be wary: if you're a Ltd Company, you're not self employed, you're either a director, employee, or both, of that Company. The Company has expenses, you do not (or at least not in the same way as self employed people).

    Hope it all works well for you!
    • fishybusiness
    • By fishybusiness 13th Jan 18, 7:54 PM
    • 1,139 Posts
    • 703 Thanks
    fishybusiness
    • #3
    • 13th Jan 18, 7:54 PM
    • #3
    • 13th Jan 18, 7:54 PM
    Your 200 days x £400 per day looks much better, and you'll have more choices around tax.

    Probably best advised to take on an accountant who can look at your personal circs and tax plan for you - you'll save more than an accountants fees.
    • Kokolot
    • By Kokolot 13th Jan 18, 8:44 PM
    • 13 Posts
    • 0 Thanks
    Kokolot
    • #4
    • 13th Jan 18, 8:44 PM
    • #4
    • 13th Jan 18, 8:44 PM
    Hi there,

    Thank you both.

    I have an accountant but he hardly contacts me about my new situation. Rather I have to contact him, because this is my first experience I am not really sure what to expect from an accountant.

    I think he gives me the necessary advice I have asked him so far, but he takes about two days to reply and maybe I was expecting more for paying £134 a month to an accountant.

    But besides that point, how does it look financially to you from a daily rate point of view?

    I don't get sick often and my contract work is consistent so far without breaks.

    I must admit I am still puzzled by the expenses aspect in that I know I can claim expenses, but not sure how to pay myself back the expenses through my own company.

    I am averaging around £900 a month in expenses mainly being hotel, subsistence, and mileage.
    • 00ec25
    • By 00ec25 13th Jan 18, 10:34 PM
    • 5,774 Posts
    • 5,222 Thanks
    00ec25
    • #5
    • 13th Jan 18, 10:34 PM
    • #5
    • 13th Jan 18, 10:34 PM
    Hi there,

    Thank you both.

    I have an accountant but he hardly contacts me about my new situation. Rather I have to contact him, because this is my first experience I am not really sure what to expect from an accountant.

    I think he gives me the necessary advice I have asked him so far, but he takes about two days to reply and maybe I was expecting more for paying £134 a month to an accountant.
    Originally posted by Kokolot
    so that is a reasonable rate for a Ltd company accounts (and a very good rate if it also includes a personal tax package). Why do you expect your accountant to reply instantly? They are not there to teach you, they gave you a package that includes some level of support, but it does not include teaching you. Read your contract with them and see what it says about asking for and receiving advice. We have over 900 one man consultancy companies in our practice and we could not possibly cope with hand holding on a daily basis. Yes we will sit down and explain the options if the client asks for it, but there comes a point where our time is charged over and above a package price.

    I must admit I am still puzzled by the expenses aspect in that I know I can claim expenses, but not sure how to pay myself back the expenses through my own company.

    I am averaging around £900 a month in expenses mainly being hotel, subsistence, and mileage.
    Originally posted by Kokolot
    it is vital that you must understand a company is a separate legal entity to you. Until that is clear in your mind you will flounder.
    You are merely an employee/officer of the company. It is the company who has the contracts with the clients and the company then employs you to do the work. As an employee you incur costs performing your work so you claim those costs from the company. The company may claim the costs from its clients ("recharges") or it may have included them in a fixed price day rate. Either way you as employee take money out of the company on presentation to the company of evidence of your costs ie. mileage claims, receipts for hotel bills, restaurant bills, etc. If you want to adopt the "proper" approach you simply add up all your receipts, write the total on a bit of paper, staple the receipts to the page and head the page Expenses claim, date: January 2018, employee name Kokolot

    The company keeps those receipts to support the costs it records in its accounts to support its profit calculation. Of course in most one man bands they don't bother with an actual expense claim page. They just wang in the receipts to the accountants periodically and meantime take the money out as and when. That is fine as long as your accountant can tie the money going out directly to the receipts coming in, otherwise it looks like your (taxable) remuneration, not your expenses.

    Appreciate than accountants deal with hundreds like you each year so will just process as they see fit based on experience. They won't necessarily instruct you how to operate unless your approach is so messy they have no idea what you are doing and need to "discipline" you to behave in a certain way. The accountants will however let you know (eventually) if the costs you are claiming from the company are not actually allowable costs that a company can pay its employees. Those sort of issues are why you employ an accountant to do Ltd Co accounts. Again if you want to know that up front then you need to check what level of advice your accountants will give without charging you for it. That said you'd have to be doing some pretty unusual things for your accountants not to be able to deal with you in their sleep.
    Last edited by 00ec25; 13-01-2018 at 10:40 PM.
    • Kokolot
    • By Kokolot 14th Jan 18, 12:05 PM
    • 13 Posts
    • 0 Thanks
    Kokolot
    • #6
    • 14th Jan 18, 12:05 PM
    • #6
    • 14th Jan 18, 12:05 PM
    Taken on board.

    How about the original question, am I better off now than when I was full-time?

    My cost of living is around £18,000 a year when I was full-time and it is the same now.
    • trailingspouse
    • By trailingspouse 14th Jan 18, 3:36 PM
    • 2,598 Posts
    • 4,016 Thanks
    trailingspouse
    • #7
    • 14th Jan 18, 3:36 PM
    • #7
    • 14th Jan 18, 3:36 PM
    Are you Kokolot? Or James Fuller?

    You're supposed to work out which is best before taking on the major step of setting up a limited company. You're playing with the big boys now.

    No-one expects you to know how to do it from the get-go - but we do expect you to listen when you're told. In a previous thread I explained to you how expenses work when you are a limited company. I also explained at length the concept of you and the company being separate entities.

    As to paying yourself back the expenses - watch my lips - you work out (supported by receipts) how much your company owes you, and then you pay that money across from the company bank account (please tell me you have a company bank account) to your personal bank account.
    • fishybusiness
    • By fishybusiness 15th Jan 18, 8:46 AM
    • 1,139 Posts
    • 703 Thanks
    fishybusiness
    • #8
    • 15th Jan 18, 8:46 AM
    • #8
    • 15th Jan 18, 8:46 AM
    How about the original question, am I better off now than when I was full-time?
    It's a numbers game.

    When employed you would be liable for standard PAYE tax/ nat ins and pensions.

    As an employee and director of a ltd you have much more choice as to how your earned income is used, including pension planning.

    As said, the best person to do the number crunching and work through the most appropriate tax choices is your accountant.

    Why not book an appointment with your accountant, ask the same questions you have asked here, and find out what options are open to you?

    Edit: Tax rules change year on year, appropriate advice given here now may change after April - use your accountant.
    Last edited by fishybusiness; 15-01-2018 at 8:48 AM.
    • Pennywise
    • By Pennywise 15th Jan 18, 9:03 AM
    • 9,613 Posts
    • 17,673 Thanks
    Pennywise
    • #9
    • 15th Jan 18, 9:03 AM
    • #9
    • 15th Jan 18, 9:03 AM
    I have an accountant but he hardly contacts me about my new situation. Rather I have to contact him, because this is my first experience I am not really sure what to expect from an accountant.

    I think he gives me the necessary advice I have asked him so far, but he takes about two days to reply and maybe I was expecting more for paying £134 a month to an accountant.
    Originally posted by Kokolot
    If you're not happy, then just change. There are hundreds of accountants out there, and it's very easy to change.
    • motorguy
    • By motorguy 16th Jan 18, 6:30 PM
    • 15,953 Posts
    • 9,219 Thanks
    motorguy
    Hello all,

    Just wondering. Recently I started my own business for the first time and wondering how much better off I am (if at all).

    In my previous full-time job I earned £50,000 a year.

    Now I earn £400 a day as a self-employed person through my LTD company and expected to work around 200 working days a year. The contracts will be outside IR35.

    My claimable expenses are roughly £10,000 a year.

    There are calculators out there which suggest I am better off, but from real experience and maybe from similar people here in similar positions if this is good?
    Originally posted by JamesFuller
    Ok, to answer your question, and roughly speaking...

    £400 * 200 man days = £80,000

    Take off your claimable expenses of £10,000 = £70,000

    I would expect you to be able to be paying no more than £12,000 in tax if you're accountant is any good, so thats you down to £58,000. Lets take off another £1,500 to pay him = £56,500.

    The salary calculator here -

    https://www.thesalarycalculator.co.uk/salary.php

    tells me you'd need to be earning £84,000 ish in a PAYE role to equal that.
    Last edited by motorguy; 16-01-2018 at 6:47 PM.
    You are not special. You are not a beautiful and unique snowflake.
    • theonlywayisup
    • By theonlywayisup 16th Jan 18, 7:03 PM
    • 11,706 Posts
    • 7,908 Thanks
    theonlywayisup

    I would expect you to be able to be paying no more than £12,000 in tax if you're accountant is any good, so thats you down to £58,000. Lets take off another £1,500 to pay him = £56,500.
    Originally posted by motorguy
    If the OP is a director then dividends are one of the most tax efficient ways of taking profits from the business.

    I haven't been "paid" in nearly 24 years but I have an income from dividends of the companies I am a director of.
    • motorguy
    • By motorguy 16th Jan 18, 7:27 PM
    • 15,953 Posts
    • 9,219 Thanks
    motorguy
    If the OP is a director then dividends are one of the most tax efficient ways of taking profits from the business.

    I haven't been "paid" in nearly 24 years but I have an income from dividends of the companies I am a director of.
    Originally posted by theonlywayisup
    Apologies - to elaborate, i wasnt talking about PAYE tax due, but the total amount of tax the company will pay on revenue of £80,000 ish minus £10,000 expenses.
    You are not special. You are not a beautiful and unique snowflake.
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