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  • FIRST POST
    • sanfranfan
    • By sanfranfan 16th Apr 18, 8:22 PM
    • 4Posts
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    sanfranfan
    s/e or ltd co
    • #1
    • 16th Apr 18, 8:22 PM
    s/e or ltd co 16th Apr 18 at 8:22 PM
    My husband is still employed until the end of this month and then he will work for an American company for a set amount per year.

    His income will be $60,000 per annum for now with room for substantial increases later in the year.

    There will be little in the way of expenses at the moment as he is working from home.

    Likely expenses will be home based stuff e.g. internet/heating/ lighting etc.

    The question is:
    Will it be best for him to be self-employed or become a limited company?

    He is to pay his NI and Tax and personal pension from this income.

    He is to contact an accountant next week so is it best to discuss it with them.
    Last edited by sanfranfan; 16-04-2018 at 8:30 PM. Reason: correction
Page 1
    • 00ec25
    • By 00ec25 17th Apr 18, 7:27 AM
    • 6,989 Posts
    • 6,659 Thanks
    00ec25
    • #2
    • 17th Apr 18, 7:27 AM
    • #2
    • 17th Apr 18, 7:27 AM
    He is to contact an accountant next week so is it best to discuss it with them.
    Originally posted by sanfranfan
    yes it is
    to answer your question properly would require a lot more info than you have given
    • sanfranfan
    • By sanfranfan 17th Apr 18, 12:45 PM
    • 4 Posts
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    sanfranfan
    • #3
    • 17th Apr 18, 12:45 PM
    • #3
    • 17th Apr 18, 12:45 PM
    Hi thanks for replying.


    I'm unsure as to the additional questions needed as it seems to me to be as straight forward as to what I have posted.
    Or isn't it?
    (we are new to this so may be nave)

    Husband will no longer be PAYE with his current job.

    He is to do consultancy work at home and be paid every 2 weeks in $.

    If he goes s/e then I understand he pays his own tax/NI and any pensions he obtains. Then he deducts expenses which I believe are some of the utilities/pensions etc.
    A rough estimate is he will bring in what he is on now while PAYE (it's something he wants to do)

    But if he were to go as a ltd company, (I know it to be more complicated) will his 'profit' be more IYSWIM even though he has little expenses to pay.




    As stated we will be seeing an accountant but I thought I'd run it by here first.


    regards
    • Pennywise
    • By Pennywise 17th Apr 18, 4:43 PM
    • 10,500 Posts
    • 19,612 Thanks
    Pennywise
    • #4
    • 17th Apr 18, 4:43 PM
    • #4
    • 17th Apr 18, 4:43 PM
    I'm unsure as to the additional questions needed as it seems to me to be as straight forward as to what I have posted.
    Or isn't it?
    Originally posted by sanfranfan
    No it's not straightforward at all. It's too simplistic to just compare tax/NIC on profits - the tax treatment of withdrawals is different as is the tax treatment of some expenses so "profits" can be very different.

    Will he need to draw out as much as possible for personal/household needs, or would he be able to build up funds (i.e. not withdraw all the profits made each year)? As a sole trader he's taxed on the profits made, whether he draws/spends it all or not but as a limited company, the company pays less tax on profits, but there's also personal tax on what he draws out. So if he doesn't draw it all out, then a company is usually beneficial.

    Mileage expenses are also very different - depending upon the split of business versus private mileage for his personal car, the price/co2 of the car, its' running costs etc.
    Last edited by Pennywise; 17-04-2018 at 4:47 PM.
    • sanfranfan
    • By sanfranfan 17th Apr 18, 6:30 PM
    • 4 Posts
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    sanfranfan
    • #5
    • 17th Apr 18, 6:30 PM
    • #5
    • 17th Apr 18, 6:30 PM
    Hi
    Thanks for the reply

    It is rather complicated

    He won't have any expenses relating to a car,

    We anticipate he will need a new computer as the current one is a few years old.
    The household deductions will only be the normal deductions possible for a home worker.

    The only personal drawings will be for the household bills eg mortgage, food.

    I will endeavour to ask the accountant on the pros and cons of each as I want him to achieve the best possible outcome for his business.
    He's worth it x

    thanks anyway
    regards
    SFF
    • chrismac1
    • By chrismac1 17th Apr 18, 7:19 PM
    • 2,537 Posts
    • 1,525 Thanks
    chrismac1
    • #6
    • 17th Apr 18, 7:19 PM
    • #6
    • 17th Apr 18, 7:19 PM
    Normally, as a rule of thumb, 30,000 of profit is the cut-off where a limited company becomes worthwhile. So you are close to it. I can send you a website link to a page which outlines the issues if you PM me.
    Hideous Muddles from Right Charlies
    • tinners93
    • By tinners93 24th Apr 18, 10:44 AM
    • 9 Posts
    • 2 Thanks
    tinners93
    • #7
    • 24th Apr 18, 10:44 AM
    • #7
    • 24th Apr 18, 10:44 AM
    Expense allowable for S/E and LTD are generally the same. Its when you get into the more technical areas the differences appear.

    You may also wish to discuss the IR35 rules as your husband could be seen as an employee.

    Self employment

    Class 2 and Class 4 NIC on 'profits' from the business. If you decide to withdrawn 10k to live off, you still have pay the above NIC on this as it will be just classed as drawings.
    You can claim capital allowances against things such as the new computer

    Ltd

    Withdraw the optimal salary from the company and the rest as dividends
    Class 1 NIC on the salary, Class 1S for the company.(Taking the optimal salary will avoid this)
    Added costs to a LTD: payroll costs, statutory accounts preparation and submission
    Can claim capital allowances as per the above
    The company can pay directly into a pension scheme for a director, this is also allowable expense so you will be saving 19% CT - most efficient way to take money out of a company.

    Ask your accountant to do some generic calculations comparing the both.
    • badmemory
    • By badmemory 24th Apr 18, 12:17 PM
    • 1,987 Posts
    • 2,740 Thanks
    badmemory
    • #8
    • 24th Apr 18, 12:17 PM
    • #8
    • 24th Apr 18, 12:17 PM
    Be wary of the implications of charging for use of your home
    • sanfranfan
    • By sanfranfan 26th Apr 18, 2:28 PM
    • 4 Posts
    • 0 Thanks
    sanfranfan
    • #9
    • 26th Apr 18, 2:28 PM
    • #9
    • 26th Apr 18, 2:28 PM
    Hi

    We have just seen a local accountant and discussed both options.

    Based on what was discussed and explained re what can/can't/shouldn't etc be claimed for hubby has decided to go self-employed.

    Thanks to everyone for their input

    Kind regards and have a nice afternoon.

    SFF
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