Soletrader want to become limited

7486keh

Hi all
I am currently self-employed but want to become a limited company, I expect to earn around £50,000 a year but with current commitments and future ones I can see this rising.
My question is if I become a limited company have I worked out the below correctly?

Business will have 2 directors

£50,000 turn over

Basic salary for director a £8000
Basic salary for director B £8000
Expenses £8000
Total expense £24,000

Business gross profit £ £26,000
20% incorporation tax £5,200
Business Profit £20,800

Dividend director a £8000
Dividend director B £8000

Director A&B salary and dividends £32,000

Business account £4,200

Basically I want to become limited now before my earning increase but I want to know if the above is correct, if it is I don’t have to wait until I earn more.

Thanks for your help

TBagpuss

I don't think that there is any minimum level of turnover to become a limited company. Do you currently have an accountant? I would suggest having a chat with them about what would be involved and whether it is cost-effective at present for you.

DigForVictory

+1 for talk to an accountant.
Also if you're VAT registered, HMRC need to know about what they call a Transfer of Going Concern & on what date.

Savvy_Sue

+ another one for talking to an accountant ...

martindow

If you are not registered for VAT, you also need to discuss with an accountant the effect of going over the threshold when you would be obliged to register.

If you work for individuals who are not VAT registered you would have to increase your prices or reduce your margins. This can have a major effect if you are in a competitive market. If you are only dealing with companies you may be advised to register voluntarily for VAT, if you have not already done so, in order to reclaim the VAT element on your purchases and expenses.

WillowCat

You mention 'you' will be earning £50k p/a but you have two directors. Are both fee earners? Beware if director 2 has only limited duties (admin/bookkeeping etc) HMRC may regard a similar salary as tax avoidance.

Make use of your full tax allowance. This year it's £10,000 so you are missing out on £2000 of tax free income. The national insurance payments can be taken care of via https://www.gov.uk/employment-allowance

Other than that, as said previously, see your accountant.