Changing from sole trader to limited company - help needed

stickybun9

Hope someone can help please.

My hubby has been a sole trader for many years using a personal bank account and paying self employed N.I. payments from this account. I have been doing his books and also completing his self assessment tax returns each year.

Now however, for an extra layer of protection, as the business grows, he has decided to go limited. He's created a new limited company at Companies House with himself and me as directors and I've managed to do all the necessary documentation there regarding returns and accounts etc.

We opened a new business bank account and informed HMRC (N.I. office) we needed to change his N.I. payments to the new account. However, when the form arrived I suddenly wondered whether things ought to change. He still wants to pay himself whatever he can afford each month according to profits and pay tax using the self assessment route, rather than using PAYE system.

My questions are:
Will it still be ok for hubby's self employed N.I. payments to come out of the limited company account?
Can I still complete his tax return using the self assessment online when the time comes?
Or because it's a limited company do we have to do things differently?

Your advice will be appreciated.

Prothet_of_Doom

AS the sole director, I am also an employee of my ltd company, so I pay my NI, for the salary part of my earnings via the HMRC's free online software, after I registered as an Employer.

He and you will then (I assume both take dividend) so both of you will continue to do a self assessment.

AbbieCadabra

have you got an accountant? completing Ltd Co. annual accounts & filing them are generally not considered to be a DIY job.

InsideInsurance

stickybun9 wrote: »

Will it still be ok for hubby's self employed N.I. payments to come out of the limited company account?
Can I still complete his tax return using the self assessment online when the time comes?
Or because it's a limited company do we have to do things differently?

No, your hubby isnt self employed and so doesnt pay SE NI any more. He is an employee of the company and so will have to decide what salary, if any, he is paying himself and NI will be calculated off that and done through PAYEE

The remainder of the money gets withdrawn as Dividends and doesnt attract NI

He will still need to do self assessment online but fills in the director section not the self employed. Effectively it predominately is dealing with any tax shortfall from the dividends.

Things are different, you also have to do the companys tax returns to pay its corporation tax.

Whilst its valiant to try and do all these things yourself the company returns are much more complex and arent designed for the uninitiated to complete unlike self assessment. It is worth seriously considering getting an accountant, if you continue doing the book keeping and give them the data in their preferred method it will keep their costs down fairly well.

Aquamania

stickybun9 wrote: »

Hope someone can help please.

My hubby has been a sole trader for many years using a personal bank account and paying self employed N.I. payments from this account. I have been doing his books and also completing his self assessment tax returns each year.

Now however, for an extra layer of protection, as the business grows, he has decided to go limited. He's created a new limited company at Companies House with himself and me as directors and I've managed to do all the necessary documentation there regarding returns and accounts etc.

We opened a new business bank account and informed HMRC (N.I. office) we needed to change his N.I. payments to the new account. However, when the form arrived I suddenly wondered whether things ought to change. He still wants to pay himself whatever he can afford each month according to profits and pay tax using the self assessment route, rather than using PAYE system.

My questions are:
Will it still be ok for hubby's self employed N.I. payments to come out of the limited company account?
Can I still complete his tax return using the self assessment online when the time comes?
Or because it's a limited company do we have to do things differently?

Your advice will be appreciated.

In response to your two questions.

1. In your position, you can actually use whatever money you want from any account. But surely it's better to keep business and personal expenditure separate? Really surprised you didn't discover this as a sole trader, and have a separate business bank account then (as well as it not usually being allowed to use a personal account for business purposes.)
2.As a director, your hubby will still need to complete an annual self assessment, so yes you can carry on doing that online for him:)
But you will also have to fullfil the requirements to file company accounts.

As others have indicated, an accountant is generally a good idea for any business, especially a limited one, but with your apparent lack of understanding, I would say it's vital in your instance.

stickybun9

Thanks, all, for your helpful replies. It does look as though getting an accountant would be the way to go. We just want to do as much ourselves as possible to keep down the costs (having been burned by an accountant in the past). I've had a look at the basic tools provided by HMRC for doing your own tax and NI payments and it looks as though that will be good for us. (Thanks Prophet of Doom)

AbbieCadabra

we're only a small Ltd. Co. & i do all our accounts/book-keeping, vat returns, wages (using HMRC basic tools) & annual return at companies house. we use an online accountant who we pay a monthly fee to (based on turnover & number of transactions per month), they prepare the annual accounts & file them & also do our personal tax returns (2 directors).

there's some basic info here that you might find useful (check any £'s quoted as i'm not sure if the site is kept updated with latest figures for current tax year).

trailingspouse

When you are a sole-trader, you and the company are one and the same. When the company becomes a limited company, it is a separate entity. There's you, and there's the company. Separate.

Once you 'get' that (and it isn't always easy!!), everything else makes much more sense.

You sound like you run your business in a similar way to how I do it - I do all the bookkeeping, VAT, invoicing, EC Sales list, chasing payments, filing receipts, annual return to Companies House, and I deal with the bank, HMRC, and the accountant. But the accountant does our books at the end of the year. Accountants basically charge by the hour - if your books are a mess and they have to sort through a pile of crumpled receipts, they will charge more than they would if everything was in order and easy to access.

I would always recommend an accountant if you have a limited company - they're not just there to do the paperwork, they will help you to decide the most tax efficient way to access the company's earnings, keep you right regarding deadlines, and generally stop you making a mess of things.