Crippling debt - but I can sell my business?

Ryemck

Sorry if stupid question but, why? I'd have to pay corporation tax on earnings, then income tax/national insurance on the wages I pay myself :P I'd lose money haha

brucethefish

Not stupid at all!  
I think you said you earnt £26,000, so if you pay your self approx 8,000 salary you wouldnt pay tax/ni this.Corporation tax would be approx £3,400, take the rest as dividends, personal tax is approx £550, so total tax payable of aroumd £4000.  Loads of assumptions in this, including no other earnings. 

madaboutspots

How did the website come about? Did you include that in your costs? Running costs - including your office space... Is it worth a re-check of your self assessment? ... Maybe even an accountant?

£500/£800 now would make a less painful time that 4-5 years! 

Consider/check/research...?

greensalad

It's definitely worth discussing with HMRC a payment plan. Make it viable and have numbers and facts to back up how much you can afford without stopping you from being able to meet future obligations. All my dealing with HMRC have been pretty good in regards to this sort of thing, though I've only ever negotiated for under 12 months of repayments.

I would also consider getting an accountant. Personally I don't think a ltd would be worth it. You wouldn't lose money (you don't pay NI & Income Tax as you simply don't pay yourself enough as a salary to do it), but it's more paperwork. But an accountant would help you unlock some additional savings on your tax mainly relating to operational costs. They can vary by area but my last Sole Trader accountant charged £500 for my Self Assessment tax return and I didn't use them other than that so it was a very reasonable cost.  

Ryemck

Spoke to HMRC, not really sure what was happening with the figures but I'm allowed to pay the £500 a month. Gave them £1000 already and plan to give any extra when I get it, to be paid off mid 2021. So I'll have time to save for the full payments in 2022  

All good!

madaboutspots

Excellent. Well done.

Brenster

Have you thought of selling equity in your business ? say 33%%, retaining 66% ? 
I am sure someone would invest say £20k for 33% based on a passive income of say £650 per month, that way you retain your passive income of aprox £1500 / month, 66% of your successful business and £20k in your pocket to pay off your bills (obv subject to tax).  The investor may also be able to drive the business forward to earn potentially more.
Obviously any investor would want to do due diligence on the business and your self, which is why it would usually be a family or friend in this circumstance.
Good Luck

femalemonarchfemalecanine

brucethefish said:

Not stupid at all!  
I think you said you earnt £26,000, so if you pay your self approx 8,000 salary you wouldnt pay tax/ni this.Corporation tax would be approx £3,400, take the rest as dividends, personal tax is approx £550, so total tax payable of aroumd £4000.  Loads of assumptions in this, including no other earnings. 

be careful doing this - avoiding tax and NIC has backfired on many people recently who now find they don't get as much help as they might have

Retireby40

Brenster said:

Have you thought of selling equity in your business ? say 33%%, retaining 66% ? 
I am sure someone would invest say £20k for 33% based on a passive income of say £650 per month, that way you retain your passive income of aprox £1500 / month, 66% of your successful business and £20k in your pocket to pay off your bills (obv subject to tax).  The investor may also be able to drive the business forward to earn potentially more.
Obviously any investor would want to do due diligence on the business and your self, which is why it would usually be a family or friend in this circumstance.
Good Luck

Was exactly what I was about to say. Many investors would be interested in something similar. Obviously with all the checks and evidence of earnings and sustainability of the website. I know myself that I would happily invest 10k (I dont have 20k cash) for say 15-20% or so until the 10k was paid back and then new terms could be agreed on the %. Maybe reduced to 10% a year or something especially if it is 100% passive.

Ryemck

10k now in exchange for 100k+ over 5+ years, doesn't sound like a good idea to me haha

If I could find someone who could push the business forward (as I'm no expert by any means, been winging it the whole time) I'd happily share some equity

Problem is, hard to find someone who can genuinely help :S