Jump to a ltd company

Fedcas65

Hi, I posted this before in another thread, but it was becoming too much into one thread, so I thought to open a dedicated thread.

In a few words, I think I'll open a company to expand my "employment" possibilities, considering that in my field a full time employment is shrinking dramatically.
A ltd company is not my best choice but it's one additional possibility that I'm afraid I need to consider.

I thought to do everything by myself, but I'm not the kind of person that does it and then cries for problems, I wanna know everything in advance.
What kind of figure/person would be the best to introduce me to this world of being self-employed? Or even drive me through? I don't want to make mistakes, despite I'm trying as hard as possible to get all the info but I don't want to go mad and leave out thing behind at the same time.

I've been reading all the government resources and I've got the following questions:

1. In this financial year, I'd be employed for 10/12 months, if I register the company now, what would happen next? Shall I do my tax assessment and how it would be calculated in the case I don't find any "contract" job up to the end of the financial year? I want to register the company now because I don't want to apply for jobs and I'm not ready with my company. I theory it will be open in 24h, but the PAYE will be available in 3 weeks, it's ok but I'm concerned about other possible delays on top of the 3 weeks.
2. It seems that a ltd company is what I need, but there are too many things to know, like the immediate next steps, I should get my unemployment insurance for a while as I lost my job, in my knowledge is not taxed, but what about me having a ltd company?
3. I'd register the company at home and that would luckily be the location of my work, but it may change with different contracts in future (either partially or absolute), any remark here?
4. Do I need any special insurance? My home insurance may not pay for customers etc, gladly no one will come here as I work remote, but I may also visit customer locations, maybe even regularly, so does my home count as location of business? Does it go in percentage of weekly hours of work? In that case, I need to inform my home insurance to see if they cover it
5. What about my mortgage? It's suggested to let them know, so I know I need to phone the bank, but I don't want to end up in a situation where I already registered the company and then I'll get serious irreversible troubles with either the home insurance or the mortgage itself. So, here I'm looking more for your experience on it, my specific case will be dealt with the bank
6. CGT in case of sale... In my situation, as I may need to sell my house soon, apparently I need to pay taxes if one room is dedicated to the job, well it's obvious that one room is a office and that's valid for pretty much everyone out there, but I may always declare that I work wherever with my laptop, so how would that work? More importantly, I don't have only my office hardware there, I also have my stuff, other monitors, my computer etc...
7. VAT... These are the criteria. You must register if either:
- your total taxable turnover for the last 12 months goes over £90,000 (the  VAT  threshold).- you expect your taxable turnover to go over £90,000 in the next 30 days. If I consider the gross income of my current year as employed, it doesn't go over 90k. I can't expect to get 90k in the next 30 days, but I may expect to get more than 90k in the next 12 months, or next financial year as we're close to it, would that count?
8. I need to register as PAYE (at least for the first year) and I also want to be able to pay dividends in the 2nd year, so as employer I pay dividends to me, do you know any accountancy service that makes this easy? I can't go crazy for this stuff, on the paper it seems all easy, but as there are fines for any mistakes, I need to make the entire story super easy, whatever is the cost... It has to be painless. Gemini says the following about the leverage between PAYE and dividends, is it correct? The Optimal Hybrid Strategy (2025/26 Tax Year)
   Most accountants recommend a combined approach to maximize take-home pay and secure future state benefits. 
   • Pay a small salary up to the personal allowance threshold (often £12,570 for 2025/26). This ensures you gain qualifying years for your State Pension without incurring significant Income Tax or NICs.
   • Extract the remaining funds as dividends from the company's post-tax profits. This portion benefits from the lower dividend tax rates and the annual tax-free dividend allowance (£500 for 2025/26). 
   This strategy provides the stability and benefits of a salary while leveraging the tax efficiency of dividends, resulting in a lower overall tax burden for the director and the company. 
9. I may not become a contractor after all, which means I may become an employee again, so I wonder if the costs in the order of hundreds of pounds is all I need to open the company, I just hope I didn't miss anything that it's in the order of a few thousands, because that would crack me down, thanks.

Isthisforreal99

Is there a reasin you are ignoring suggestions to go and get some paid for professional advice.

For someone, and let's be honest, who has to ask the same questions again and again this is way too much for you to handle by DIY.

Fedcas65

Isthisforreal99 said:

Is there a reasin you are ignoring suggestions to go and get some paid for professional advice.

For someone, and let's be honest, who has to ask the same questions again and again this is way too much for you to handle by DIY.

Even though I know most of the answers, I'd still pay a professional to verify that I understood.

Regarding your question, I was asking who's the figure that has this knowledge, is it a tax accountant? A business consultant? I'm not sure who has those knowledge.

Isthisforreal99

Fedcas65 said:

Isthisforreal99 said:

Is there a reasin you are ignoring suggestions to go and get some paid for professional advice.

For someone, and let's be honest, who has to ask the same questions again and again this is way too much for you to handle by DIY.

Even though I know most of the answers, I'd still pay a professional to verify that I understood.

Regarding your question, I was asking who's the figure that has this knowledge, is it a tax accountant? A business consultant? I'm not sure who has those knowledge.

The last post on this thread gave you some pointers as to where to start - https://forums.moneysavingexpert.com/discussion/6646814/working-out-my-taxes-as-self-employed#latest

Fedcas65

Isthisforreal99 said:

Fedcas65 said:

Isthisforreal99 said:

Is there a reasin you are ignoring suggestions to go and get some paid for professional advice.

For someone, and let's be honest, who has to ask the same questions again and again this is way too much for you to handle by DIY.

Even though I know most of the answers, I'd still pay a professional to verify that I understood.

Regarding your question, I was asking who's the figure that has this knowledge, is it a tax accountant? A business consultant? I'm not sure who has those knowledge.

The last post on this thread gave you some pointers as to where to start - https://forums.moneysavingexpert.com/discussion/6646814/working-out-my-taxes-as-self-employed#latest

Yes but that forum still needs to approve my account and who knows when it's gonna happen, if I asked here there is a reason .
Regarding professional, what's that profession for those questions? Then I would search online.

JibberdyDacodo

Fedcas65 said:

Regarding your question, I was asking who's the figure that has this knowledge, is it a tax accountant? A business consultant? I'm not sure who has those knowledge.

You would be looking for an accountant.

[Possibly, have a chat with a couple of accountants as regarding the options available so you can compare what they each say - of course you will only be appointing one to actually deal with your business going forward]

DoctorStrange

Oh my word...

Honestly not sure where to start here but let's maybe try to get a couple of things out of the way first of all. 

Starting your own business doesn't increase your employment opportunities. By definition you're entering into business on your own account; there can be no employers. 

If you're talking about "contracting" then please start researching the Off Payroll Rules (formerly known as IR35, but technically different).

If you think there's any sort of tax angle here, think again. Dividends are taxed lower than PAYE, but PAYE doesn't pay Corporation Tax first...

Then, you need to be clear you're essentially three different entities. The company would have legal personality, yourself as Director has legal responsibilities, and yourself as an employee has certain rights. All very tricky and it's best to seek advice here.

As for your mortgage, don't even try to get cute here and mix ownership between yourself and your company. Honestly, getting tax relief on the heating bills or gaining some extra income from renting a room is nothing compared to the complexities and taxes you may face later. One of the first rules you'd need to learn is to keep your personal assets and finances separate from the company's.


As for for VAT, remember that applies to your gross sales; it's nothing to do with your "employment income"


Finally, please research your market thoroughly. You'll likely find the "employment opportunities" do indeed require a company - but it might be an umbrella company rather than a limited company....

Fedcas65

DoctorStrange said:

Oh my word...

Honestly not sure where to start here but let's maybe try to get a couple of things out of the way first of all. 

Starting your own business doesn't increase your employment opportunities. By definition you're entering into business on your own account; there can be no employers. 

If you're talking about "contracting" then please start researching the Off Payroll Rules (formerly known as IR35, but technically different).

If you think there's any sort of tax angle here, think again. Dividends are taxed lower than PAYE, but PAYE doesn't pay Corporation Tax first...

Then, you need to be clear you're essentially three different entities. The company would have legal personality, yourself as Director has legal responsibilities, and yourself as an employee has certain rights. All very tricky and it's best to seek advice here.

As for your mortgage, don't even try to get cute here and mix ownership between yourself and your company. Honestly, getting tax relief on the heating bills or gaining some extra income from renting a room is nothing compared to the complexities and taxes you may face later. One of the first rules you'd need to learn is to keep your personal assets and finances separate from the company's.


As for for VAT, remember that applies to your gross sales; it's nothing to do with your "employment income"


Finally, please research your market thoroughly. You'll likely find the "employment opportunities" do indeed require a company - but it might be an umbrella company rather than a limited company....

I reply below as I think it can interfere with the posting process...
(this is the 2nd message as the system "lost it" after posting...)

I want to increase my changes to receive an income, as employee right now I don't have a ltd company, so I'm excluded from all the contractors jobs.

Thanks for mentioning the Off Payroll Rules, but every job posting mentions IR35, so I'll need to understand that better...

With dividends I can take more money as I'm taxed less overall, this is what I understood, but I can do it only from the 2nd year, and maybe is not so cool on the 2nd year, maybe the 3rd one, as in the gross of the 1st year may not be enough to generate the dividends I need.

As a single company owner and member of the company, I'll just be the director.
If I'll find a job as an employee, ok it makes sense, I'll need to consider this too and I'll certainly ask a tax accountant minimum.

My company would be a ltd company, so it's separated from my life as standard, unless I compromise it on purpose.
Though the mortgage and house insurance will need to be reviewed anyway as it changes if I work from home, so that's the first thing I'll do. For example, my mortgage provider may even ask me to remortgage which is quite a disaster, but let's see.

I mentioned the VAT because I wanted to do it in advance to avoid not getting paid for 3 weeks (as it takes 3 weeks max), but I don't think I can determine how much money I'll make if I don't have a contract in hand that proves it, I'll ask an accountant.

Umbrella companies are an option, but I've chosen the ltd in order do not deal with them.
In terms of "contractor" job, they almost always propose inside IR35, I don't want to do that either (as pretty much everyone else), but I may need to consider that too as it's like 95/100 cases inside IR35 when it comes to contractor jobs.

DoctorStrange

Your objectives are in conflict. 

You mention both trying to find "jobs" and also being "Outside IR35". These two things are entirely different, but I don't think we have to go into all the reasons why right now.

Your first motivation should be to find the correct opportunity to earn (regardless of whether that's a job or B2B contract).

Tax considerations are only a secondary concern right now. 

Notwithstanding that, a company can be set up and running within a few days, so you're not 'being excluded" by not already having something set up. 

Your VAT points make no sense. As a LtdCo, you'll collect VAT at the same time as you "get paid", so it makes no difference to the settlement period.

My only advice is to honestly assess what you're looking for, and forget everything you've heard (or think you've heard) about "contracting" being a good "tax play". This isn't 2010 any more, any loophole you think you've found is long since closed, and any tax differences are in the basis point range now.

Isthisforreal99

DoctorStrange said:

Your objectives are in conflict. 

You mention both trying to find "jobs" and also being777 "Outside IR35". These two things are entirely different, but I don't think we have to go into all the reasons why right now.

Your first motivation should be to find the correct opportunity to earn (regardless of whether that's a job or B2B contract).

Tax considerations are only a secondary concern right now. 

Notwithstanding that, a company can be set up and running within a few days, so you're not 'being excluded" by not already having something set up. 

Your VAT points make no sense. As a LtdCo, you'll collect VAT at the same time as you "get paid", so it makes no difference to the settlement period.

My only advice is to honestly assess what you're looking for, and forget everything you've heard (or think you've heard) about "contracting" being a good "tax play". This isn't 2010 any more, any loophole you think you've found is long since closed, and any tax differences are in the basis point range now.

The problem is, and I alluded to this in my earlier post, is that OP (sorry to say) has no clue what they are looking for,  relying on some Internet research as the correct way to go. As you say the objectives are in conflict and asking some random strangers on a Internet forum isn't the way to go.