Limited companies and labour's autumn budget...

Bookworm105

FFHillbilly said:

Bookworm105 said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.
the allowance for dividends has also gone down to £500 now, it used to to much higher.
essentially Ltd co pays 19% corporation tax and 8.75% dividend tax with an allowance of only £500, and sole traders would pay 20% tax and 6% Class 4 NI with an allowance of £12570
with the Ltd company it's a bit more flexible regarding staying under the higher rate of tax but I don't see that working out long term
Doubt my customers would even notice the change too

your comparison is very poor probably stemming from your lack of knowledge of how to most effectively use thresholds other than the personal allowance, the latter being what you appear fixated on 

well I won't disagree about my lack of knowledge, care to enlighten me without just saying "speak to your accountant"?

no because I do not know your complete personal financial circumstances and therefore cannot compute your ideal mix of income and dividends whilst still securing state pension entitlement, but it will not be salary 12,570.

TheSpectator

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

FFHillbilly

TheSpectator said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

It's an extra £1135 compared to being a sole trader

Grumpy_chap

FFHillbilly said:

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.
the allowance for dividends has also gone down to £500 now, it used to to much higher.
essentially Ltd co pays 19% corporation tax and 8.75% dividend tax with an allowance of only £500, and sole traders would pay 20% tax and 6% Class 4 NI with an allowance of £12570

Normally, there are more tax-efficient salaries than £12,570.  Personal circumstances need to be considered in full.

There have been a couple of threads where options have been discussed.  One seems to have disappeared, the other is here:
https://forums.moneysavingexpert.com/discussion/6566258/employment-allowance-for-very-small-company/p1

I am not up to speed on sole-trader NI or whether any of that has changed to reflect the element of "employer" NI embedded in the rate.  Maybe the "no change for working people" trumped equalisation.

A further option that may allow optimisation of tax liabilities is if you have a spouse and can make use of the marriage allowance

Bookworm105

FFHillbilly said:

TheSpectator said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

It's an extra £1135 compared to being a sole trader

do not have a one person Ltd

Grumpy_chap

Bookworm105 said:

FFHillbilly said:

TheSpectator said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

It's an extra £1135 compared to being a sole trader

do not have a one person Ltd

Which can be achieved while still keeping the Ltd Co - change to sole-trader is not the only option.

Bookworm105

Grumpy_chap said:

Bookworm105 said:

FFHillbilly said:

TheSpectator said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

It's an extra £1135 compared to being a sole trader

do not have a one person Ltd

Which can be achieved while still keeping the Ltd Co - change to sole-trader is not the only option.

that is what I was implying, ie more than one person in the Ltd

Grumpy_chap

Bookworm105 said:

Grumpy_chap said:

Bookworm105 said:

FFHillbilly said:

TheSpectator said:

FFHillbilly said:

Grumpy_chap said:

I can't see anything from the budget that would tip the balance from Ltd Co to sole trader.
There can be other consequences of changing trading style - particularly if any customers value the continuity of the business or such like.

it was national insurance contributions, on a payroll of £12570 it's an extra £1135.

Where does the notion that the employer NIC increase will cause an extra £1135 on a salary of £12,570 come from? You would be paying £478 on the old threshold/rate so an increase of £657.

It's an extra £1135 compared to being a sole trader

do not have a one person Ltd

Which can be achieved while still keeping the Ltd Co - change to sole-trader is not the only option.

that is what I was implying, ie more than one person in the Ltd

Yes, I know.  I was just trying to make sure the OP realised that nuance as well.

FFHillbilly

I don't think another person in the ltd co is possible, or worthwhile, as I don't know anybody suitable that doesn't already us their personal allowance.

I've looked at different salaries to try and avoid paying the extra Employers NI, I can't find a solution. 
If I were to pay myself £6500 to get pension credit, and use the extra £6070 personal allowance on my dividends, I would actually raise the amount on which I pay corporation tax and pay more (£1153 Corp tax + £225 Emp NI = more than the original £1135)

This year (24-25) Class 4 National insurance has been cut to from 9% to 6% , meaning that 20% income tax and 6% N are lower than 19% corporation tax and 8.75% dividend tax, However I don't know how long the cut is going to last so changing the company structure might not be the best idea

Grumpy_chap

FFHillbilly said:

I don't think another person in the ltd co is possible, or worthwhile, as I don't know anybody suitable that doesn't already us their personal allowance.

You seem to have decided your course of action and now looking to make the figures validate your decision.

You have ignored suggestions from others, so suspect you will ignore this also, but:
 - assume the Ltd Co will pay you a salary of £12,570.
 - that will mean employer's NI of £1,135.
 - if the Ltd Co employed an Administrator for one day per month - perhaps to do the monthly accounts and payroll - and paid £97.68 per month (8 hours at NMW £12.21) that is £1,172.16
 - the Administrator will be subject to IT at their marginal rate - assume 20% so will pay £234 in tax
 - the Ltd Co will be able to reclaim the Employer's NI paid out (£1,135)
 - still an overall gain of £900

At least, that is how I understand it would work.  I am sure others will confirm, or advise if I am incorrect.