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  • FIRST POST
    • jolester
    • By jolester 3rd Nov 17, 1:24 PM
    • 160Posts
    • 59Thanks
    jolester
    Part time employment and new business
    • #1
    • 3rd Nov 17, 1:24 PM
    Part time employment and new business 3rd Nov 17 at 1:24 PM
    Hi,

    I'm after some advice for my MIL, ideally in laymans terms please !

    She currently works part time

    She is looking to set up her own part time business to supplement her income and hopefully be able to do full time once profitable, established and stable (2-5 years)

    The questions are...

    If she does as a Ltd co and draws a dividend once in profit, so long as she stays under the Higher Tax Threshold will there be any changes to her current part time pay?

    If she gets an accountant will they sort out the tax due etc at the end of each year so long as she keeps accurate monthly records?

    If she puts her own cash injection into the business as a start up, can she put this down as a "Directors Loan" and draw out tax free once the cash is available?

    Thank you for any initial advice you can give
Page 1
    • Kayalana99
    • By Kayalana99 3rd Nov 17, 1:30 PM
    • 3,332 Posts
    • 5,965 Thanks
    Kayalana99
    • #2
    • 3rd Nov 17, 1:30 PM
    • #2
    • 3rd Nov 17, 1:30 PM
    Hi,

    I'm after some advice for my MIL, ideally in laymans terms please !

    She currently works part time

    She is looking to set up her own part time business to supplement her income and hopefully be able to do full time once profitable, established and stable (2-5 years)

    The questions are...

    If she does as a Ltd co and draws a dividend once in profit, so long as she stays under the Higher Tax Threshold will there be any changes to her current part time pay?

    You get so much tax free per year and it shouldn't affect her current pay in tax as that would stay the same - you will however have to pay tax on any profit from the business assuming she is above the threshold as the income will be a combined amount for the year.

    If she gets an accountant will they sort out the tax due etc at the end of each year so long as she keeps accurate monthly records?

    Yes

    If she puts her own cash injection into the business as a start up, can she put this down as a "Directors Loan" and draw out tax free once the cash is available?

    No idea

    Thank you for any initial advice you can give
    Originally posted by jolester
    Sorry I couldn't be of more help, hopefully give you a starting point.
    People don't know what they want until you show them.
    • martindow
    • By martindow 3rd Nov 17, 1:35 PM
    • 7,255 Posts
    • 4,045 Thanks
    martindow
    • #3
    • 3rd Nov 17, 1:35 PM
    • #3
    • 3rd Nov 17, 1:35 PM
    Is her current employer aware of her plans? Contracts of employment can have clauses regarding starting a business especially if it is in the same area of business and could be seen as a rival poaching customers. I would have a good read of the contract to be sure that it won't jeopardise her existing job.
    • jolester
    • By jolester 3rd Nov 17, 2:48 PM
    • 160 Posts
    • 59 Thanks
    jolester
    • #4
    • 3rd Nov 17, 2:48 PM
    • #4
    • 3rd Nov 17, 2:48 PM
    Hi Martin,

    No, she currently works as a Teaching Assistant and is looking into looking after animals... though some may say they are similar
    • jolester
    • By jolester 3rd Nov 17, 2:52 PM
    • 160 Posts
    • 59 Thanks
    jolester
    • #5
    • 3rd Nov 17, 2:52 PM
    • #5
    • 3rd Nov 17, 2:52 PM
    Sorry I couldn't be of more help, hopefully give you a starting point.
    Originally posted by Kayalana99
    You've been a big help thank you, would you happen to know, if she was to do this either

    a) from her home, or
    b) from a friend's home

    Would she or the other individual be able to charge rent to the business?

    How would this affect her/the other person as it would be an additional income?

    Is it possible to do this as an individual? Would it be similar to someone in London renting out their parking space?

    Thanks again !
    • Savvy_Sue
    • By Savvy_Sue 4th Nov 17, 1:58 AM
    • 37,823 Posts
    • 34,215 Thanks
    Savvy_Sue
    • #6
    • 4th Nov 17, 1:58 AM
    • #6
    • 4th Nov 17, 1:58 AM
    I'm going to backtrack to your first post, and suggest she speaks to a couple of accountants. Setting up as a Limited Company isn't always the best option, or the most cost-effective one, and it can introduce unnecessary complications.
    Still knitting!
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    • Tom99
    • By Tom99 4th Nov 17, 2:23 AM
    • 550 Posts
    • 321 Thanks
    Tom99
    • #7
    • 4th Nov 17, 2:23 AM
    • #7
    • 4th Nov 17, 2:23 AM
    I would stick with being a sole trader at least to begin with and forget the ltd idea.

    You can claim certain costs for working from home but forget the rent idea that will cause all sorts of problems, planning, income tax and council tax for starters.
    • 00ec25
    • By 00ec25 4th Nov 17, 2:28 AM
    • 5,335 Posts
    • 4,686 Thanks
    00ec25
    • #8
    • 4th Nov 17, 2:28 AM
    • #8
    • 4th Nov 17, 2:28 AM
    why do you think a Ltd Co will be cost effective for her from day 1?

    a Ltd Co does not have a tax free personal allowance of £11,500.
    Unless the company profits are >£25,000 there is no point being Ltd as the corporation tax bill negates any tax saving on dividend payment.

    Looks like your friend needs to sit down with an accountant and crunch the numbers instead of having pipe dreams
    • jolester
    • By jolester 6th Nov 17, 9:21 AM
    • 160 Posts
    • 59 Thanks
    jolester
    • #9
    • 6th Nov 17, 9:21 AM
    • #9
    • 6th Nov 17, 9:21 AM
    Thanks all, I'll tell her to make an appointment with an accountant in the first instance then

    We just thought Ltd co as her tax free allowance would be used by her current part time job and drawing a dividend from a ltd co might work out better/easier
    • Mistral001
    • By Mistral001 10th Nov 17, 10:55 AM
    • 3,257 Posts
    • 2,499 Thanks
    Mistral001
    As others have said forming a Ltd company seems like a complexity that is not needed.

    Note with a Ltd company the name of the directors and the profits the company will make will be publically available. As a sole trader you only have to tell HMRC and your accountant (if you have one) details of your business finances and they have a duty to keep such details confidential. With a Ltd Company there is no confidentiality and anybody can find out details of profits you make, business address etc.
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