Employed by my own company advice

[Gordon - Commercial Finance]

£570 per month will help, but it won't help much. It wouldn't even come close to covering my personal bills, and that's without taking into account the business bills. Google ads is my biggest expense and that has been paused, but rent and other bills are contracts. Personally I think this will go on MUCH longer than another 2 weeks. I will have to look into getting a business loan, I just wish the government took into account all situations.

They couldn’t possibly take into account all situations. They’re doing well under the circumstances.

Can you reduce your personal expenses by asking for payment holidays?

 

[Mr D]

£570 per month will help, but it won't help much. It wouldn't even come close to covering my personal bills, and that's without taking into account the business bills. Google ads is my biggest expense and that has been paused, but rent and other bills are contracts. Personally I think this will go on MUCH longer than another 2 weeks. I will have to look into getting a business loan, I just wish the government took into account all situations.

Personal bills should be negotiated with.,

Mortgage - formal mortgage holiday or an informal mortgage holiday (where you cancel direct debit, they send nasty letters and charge you fees each month).
Rent - landlord can be negotiated with.
Utilities - negotiation.
Non priority debt - offer them minimal or no payments until crisis resolved.

Ultimately there's benefits system. Which is swamped so no quick money or support likely there.

If - as some have suggested - we peak at Easter, then maybe by May or June we can have some or all restrictions relaxed.
However we may be in for a cycle of restrictions - and could be rest of year.

 

[Mr D]

They couldn’t possibly take into account all situations. They’re doing well under the circumstances.

Can you reduce your personal expenses by asking for payment holidays?

We deal with micro - our own situations. Government is used to dealing with broad brush, stuff that applies to millions.
They have been known to get into trouble when they try and build solutions based on individual circumstances.

 

[riskywhat]

They couldn’t possibly take into account all situations. They’re doing well under the circumstances.

We deal with micro - our own situations. Government is used to dealing with broad brush, stuff that applies to millions.
They have been known to get into trouble when they try and build solutions based on individual circumstances.

Surely there are tens of thousands of people in the same situation I am. People that are essentially self-employed but through a ltd company.

Yes I will be trying to reduce payments, I'm sure many companies will be more lenient than usual.

 

[UKSBD]

So anyone who operates as a ltd company vs being a sole trader is a fat cat?

And why did you leave out the fact companies pay corporation tax?

For a ltd company operating under the Vat threshold there's hardly anything in the take home pay of a sole director of he were Ltd or sole trader.

I pay Corp tax, small amount of n. I, dividend tax and employers n. I. I also pay higher accountant fees which pretty much offsets any tax advantage at this level.

I don't think sole directors should get their dividends paid but they should get their paye covered at least up to the 2500 per month threshold the same as self employed or employed workers.

No,
I'm just demonstrating how it would come across to the public if
Directors who pay themselves under the NI threshold and then top up with big dividends started shouting out too much.

 

[Mr D]

Surely there are tens of thousands of people in the same situation I am. People that are essentially self-employed but through a ltd company.

Yes I will be trying to reduce payments, I'm sure many companies will be more lenient than usual.

You are employed by a limited company.

Main difference between you and other employees is your control and your annual tax return if required to do one (not all directors do).

 

[riskywhat]

You are employed by a limited company.

Main difference between you and other employees is your control and your annual tax return if required to do one (not all directors do).

I understand that. It was a response to the comment that it's impossible for the government to take all situations into account. While I do agree that some will inevitably not get the support they need, the current system leaves out too many.

In my opinion the best way would be to make the grants more easily accessible. They way they have done it means any business that has business rates included in their rent is not eligible. When I opened up a year ago, I had two good locations I was considering. If I had gone with the other location then I would be eligible for the grant. There was very little difference between the two units.

 

[Mr D]

I understand that. It was a response to the comment that it's impossible for the government to take all situations into account. While I do agree that some will inevitably not get the support they need, the current system leaves out too many.

In my opinion the best way would be to make the grants more easily accessible. They way they have done it means any business that has business rates included in their rent is not eligible. When I opened up a year ago, I had two good locations I was considering. If I had gone with the other location then I would be eligible for the grant. There was very little difference between the two units.

It could well be that the civil servants and ministers are unaware of the rates included in rent scenario.
Before I got my own unit I was unaware of it, and had been in business well over a decade at the time.

 

[fleet73]

As a director (PAYE + divi) I understand we can furlough and can get 80% of PAYE part. Feels like a kick in the teeth after all tax paid over the years Corp, personal, employer NI, but it is what it is. It has its rewards for many over longer periods.

However, it seems self employed get up to £7,500 if profits fit in line above 30k but below 50k. Albeit they have to wait for it. They can then also claim universal credit up to 1800 depending on circumstances (more likely 500 at minimum levels assuming no savings).

To top that off, if they (as many do) have a part time job paying PAYE, they are also allowed to furlough and get 80% through employer for that. Then get a job in a supermarket (current guide says a furloughed worker can work for another company. I guess some specific contracts my not allow). This means self employed could actually walk out of this with up to 15k, employees can get up to £7,500 ( can take another key worker job as well)....

This is my thinking too regarding the self-employed deal. I am a sole ltd. company director, working from home, with a fairly modest income split with minimum PAYE (administered by my accountant) and the rest dividends. My main clients are in the entertainment/sports sector so not exactly an area with much business in the short term!

I'm resigned to the fact there's little public sympathy for those of us who take dividends (putting my head above the parapet once on Twitter was enough not to expect much popular support for "tax dodgers" like me!). If I was able to furlough myself, it's better than nothing, but equally not much help.

Currently, I am still doing a little bit of work (enough to make it preferable to furloughing/Job Retention Scheme) but not sure how much longer I will be able to depend on that.

Yet if I was self-employed, I could claim 80% of my PAYE and carry on working. My alternative as a sole director is close down, jettison my clients who I have spent a long time building up just to claim 80% of £719. And then who might benefit from me doing this? Why, the self-employed who can carry on working and fill the gap I have left!

I could probably manage on 80% and keeping some work on, but fear one or the other will be a struggle.

Incidentally, while I'm probably imagining this is even possible, what would prevent me furloughing as a director but continuing working for clients as a sole trader or get them to employ a family member as a sole trader instead to do the work?

 

[Newchodge]

The person on furlough cannot do any work othr that director's stat duties. Someone not furloughed could do anything.

 

[Mr D]

Yet if I was self-employed, I could claim 80% of my PAYE and carry on working. My alternative as a sole director is close down, jettison my clients who I have spent a long time building up just to claim 80% of £719. And then who might benefit from me doing this? Why, the self-employed who can carry on working and fill the gap I have left!

I could probably manage on 80% and keeping some work on, but fear one or the other will be a struggle.

Incidentally, while I'm probably imagining this is even possible, what would prevent me furloughing as a director but continuing working for clients as a sole trader or get them to employ a family member as a sole trader instead to do the work?

And if you were self employed you would wait until June to be paid. Could be later if there are problems.

Least companies are getting payment in theory at end of April. So employees, including directors, are getting paid between now and June if furloughed.
Can see there will be some self employed in considerable personal financial trouble with zero income and nothing from government until June at least.

 

[Ian J]

The person on furlough

You mean the furloughvian

 

[Chris Ashdown]

Me, Me, Me think also of those who have lost there jobs and will wait a long time for Universal credit/ job seekers

 

[Splatercash]

Like many, I fall into the category of paying myself £719 per month through my LTD company and taking the rest as dividends. This was on the advice of my accountant. so I trust it is legal.

It seems the furlough scheme is designed to pay 80% of employee salaries as of 28th February 2020 and the purpose of the scheme is to support both businesses and individuals. As Martin Lewis has stated, businesses have temporarily become the vehicle for delivering benefits and the Government wants to get the support out there to as many people as possible (words to that effect).

My question is, can I legally backdate a salary increase to, say, 1st January 2020 such that on 28th February my salary would be more in line with my actual takings/contribution to the business. Before anyone acts with moral outrage, please consider the fact that between salary and dividends my average monthly pre-tax take home for the last 3 years is circa £4,000 so even the £2,500 maximum would be a significant drop in income. However, it would go a long way to paying the mortgage, bills, foods, etc while we get through this period.

 

[Stas Lawicki]

Like many, I fall into the category of paying myself £719 per month through my LTD company and taking the rest as dividends. This was on the advice of my accountant. so I trust it is legal.

It seems the furlough scheme is designed to pay 80% of employee salaries as of 28th February 2020 and the purpose of the scheme is to support both businesses and individuals. As Martin Lewis has stated, businesses have temporarily become the vehicle for delivering benefits and the Government wants to get the support out there to as many people as possible (words to that effect).

My question is, can I legally backdate a salary increase to, say, 1st January 2020 such that on 28th February my salary would be more in line with my actual takings/contribution to the business. Before anyone acts with moral outrage, please consider the fact that between salary and dividends my average monthly pre-tax take home for the last 3 years is circa £4,000 so even the £2,500 maximum would be a significant drop in income. However, it would go a long way to paying the mortgage, bills, foods, etc while we get through this period.

It's a pointless question if you don't pay paye as you are not entitled to anything anyway - assuming you don't paye do you?

 

[Splatercash]

It's a pointless question if you don't pay paye as you are not entitled to anything anyway - assuming you don't paye do you?

Yeah, I'm PAYE for £719 a month and have been for 3-4 years now.

 

[Stas Lawicki]

Well that's fortunate. In answer to your question, I am not sure. There are a few wizards on this forum who will be along shortly and will give you more clarity.

I am pretty sure it's only up to your paye amount ( the 719) contribution and not dividend related so putting additional income won't make any difference.

 

[Mr D]

Yeah, I'm PAYE for £719 a month and have been for 3-4 years now.

You not think HMRC would notice?

 

[Stas Lawicki]

Sorry, just caught up - you want to up your paye amount?! Err, no then. You've notified them each month and any increase could be seen aseans to get more in light of current climate. There might be an argument for a promotion and back dating sums, but that would be paid in the next payroll so my view is : no. Again caveated others will know better than me.

 

[Splatercash]

You not think HMRC would notice?

Perhaps, but the question isn't if it would be noticed. It's whether it's legal/permissible. Take COVID-19 out of the discussion and imagine it's March 2019. If a company director wished to change the way he pays himself could he legally and justly backdate a salary increase by 'x' period of time?

I appreciate I'm asking a difficult question that in any other time or circumstance would look like tantamount to fraud but these are challenging and unique circumstances. I'm not trying to steal/take/defraud anyone. I'm just trying to find a way to get the support that I need as is pretty much everyone else in the country.

 

[Newchodge]

You are entitled to mwhatever went through the PaYE return (RTI) on 28 February. I would suggest that HMRC will very closely consider any amended February RTIs or claims to have forgottent that they ran payroll in February. You can backdate a payrise to 1 January and pay a lot of NI on the increase, but you cannot put it through payroll until your next payroll run, so cannot use it as the basis for 80%. Trying to change a previous payroll run to 'pretend' the increase happened in January in order to get this grant would be fraud, so no, you cannot do it legally.

 

[Splatercash]

You are entitled to mwhatever went through the PaYE return (RTI) on 28 February. I would suggest that HMRC will very closely consider any amended February RTIs or claims to have forgottent that they ran payroll in February. You can backdate a payrise to 1 January and pay a lot of NI on the increase, but you cannot put it through payroll until your next payroll run, so cannot use it as the basis for 80%. Trying to change a previous payroll run to 'pretend' the increase happened in January in order to get this grant would be fraud, so no, you cannot do it legally.

Thanks Cyndy, I suspected that would be the case but all avenues have to be explored. Looks like LTD company Directors are getting a really raw deal then.

Speaking personally, I'm disappointed that somehow in the eyes of the Government I've been doing the "wrong thing" all these years operating a single employee of my own LTD company (I supply and installs wood burning stoves fwiw). I thought that the guys that sold trade who - invariably - horribly mix up "business" and "personal" monies and often run everything through the same personal bank account were the "bad guys" but they appear to be better supported than any other group in the Country.

 

[Newchodge]

Thanks Cyndy, I suspected that would be the case but all avenues have to be explored. Looks like LTD company Directors are getting a really raw deal then.

Speaking personally, I'm disappointed that somehow in the eyes of the Government I've been doing the "wrong thing" all these years operating a single employee of my own LTD company (I supply and installs wood burning stoves fwiw). I thought that the guys that sold trade who - invariably - horribly mix up "business" and "personal" monies and often run everything through the same personal bank account were the "bad guys" but they appear to be better supported than any other group in the Country.

I can't disagree. In particular I think the idea that the self employed can get the grant while continuing to work, while company directors can get whatever they had on payroll only if they are doing nothing but statutory duties is unreasonable. But we have what we have. There is going to be further guidance which may address that last point, but I am not holding my breath.

 

[Mr D]

Thanks Cyndy, I suspected that would be the case but all avenues have to be explored. Looks like LTD company Directors are getting a really raw deal then.

Speaking personally, I'm disappointed that somehow in the eyes of the Government I've been doing the "wrong thing" all these years operating a single employee of my own LTD company (I supply and installs wood burning stoves fwiw). I thought that the guys that sold trade who - invariably - horribly mix up "business" and "personal" monies and often run everything through the same personal bank account were the "bad guys" but they appear to be better supported than any other group in the Country.

Not a raw deal - we choose to have our pay the way it is. And now have to deal with the fact our choice isn't an optimal one any more.

Can hardly complain now that we should have been paying more to government previously.

 

[UKSBD]

Like many, I fall into the category of paying myself £719 per month through my LTD company and taking the rest as dividends. This was on the advice of my accountant. so I trust it is legal.

It seems the furlough scheme is designed to pay 80% of employee salaries as of 28th February 2020 and the purpose of the scheme is to support both businesses and individuals. As Martin Lewis has stated, businesses have temporarily become the vehicle for delivering benefits and the Government wants to get the support out there to as many people as possible (words to that effect).

My question is, can I legally backdate a salary increase to, say, 1st January 2020 such that on 28th February my salary would be more in line with my actual takings/contribution to the business. Before anyone acts with moral outrage, please consider the fact that between salary and dividends my average monthly pre-tax take home for the last 3 years is circa £4,000 so even the £2,500 maximum would be a significant drop in income. However, it would go a long way to paying the mortgage, bills, foods, etc while we get through this period.

You do realise that if you did do that it could cost you about £7500 in National Insurance?
Possibly more than you would get if you were on Furlough

 

[jameZee]

It could be worth researching whether some drawings can be reported as PAYE instead. This will obviously crystallise your tax position, but having said that, PAYE is reported in real-time, so I'm uncertain if that will be legal or an acceptable method of processing earnings.

Our business is fortunate enough to qualify for the SBRR grant, which means we could potentially top-up earnings (although the additional will not be covered by HMRC).

This means that as a director, I could potentially top up slightly to avoid going into complete personal financial meltdown without taking the p*** too much from the business.

 

[Newchodge]

It could be worth researching whether some drawings can be reported as PAYE instead. This will obviously crystallise your tax position, but having said that, PAYE is reported in real-time, so I'm uncertain if that will be legal or an acceptable method of processing earnings.

Our business is fortunate enough to qualify for the SBRR grant, which means we could potentially top-up earnings (although the additional will not be covered by HMRC).

This means that as a director, I could potentially top up slightly to avoid going into complete personal financial meltdown without taking the p*** too much from the business.

director's drawings? No, that cannot go through PAYE, unless it is subject to tax and NI as PAYE income.

 

[jameZee]

That's what I'm looking into. Whether we can process previous drawings as PAYE instead, pay the relevant taxes and NI, but at least be supported through the Furlough process for personal income security.

For those fortunate enough to qualify for the SBR grant, I'm not sure if it would be acceptable to use a proportion for drawings? The grant is finite, whereas Furlough would assumedly last as long as the Gov holds lockdown and business closures.

 

[Mr D]

That's what I'm looking into. Whether we can process previous drawings as PAYE instead, pay the relevant taxes and NI, but at least be supported through the Furlough process for personal income security.

For those fortunate enough to qualify for the SBR grant, I'm not sure if it would be acceptable to use a proportion for drawings? The grant is finite, whereas Furlough would assumedly last as long as the Gov holds lockdown and business closures.

Figure at least a couple months of some sort of lockdown, (cannot see it being stopped as we hit peak) maybe reduced later then reimposed as virus ramps back up.
Could be much later in the year before we have a new normal. May never return to the normal we had - and some businesses may simply be unable to recover.

 

[Splatercash]

I'll confess that I followed the PAYE +Dividends approach on the advice of my accountant and don't understand the intricate details of how much is "saved" by adopting that approach.

Is there a calculator (or can anyone manually) spit out some numbers for all taxes/NI, etc payable in the following examples:

1. £50k salary taken PAYE
2. £50k taken as £8,628 salary the rest dividends to Director

I was working to the assumption that the saving was pretty marginal (a few %) but with talk of £7,500 NI, I'm wondering if that's actually the case. Appreciated if anyone takes the time, I feel this might help in the re-framing process.

 

[UKSBD]

I'll confess that I followed the PAYE +Dividends approach on the advice of my accountant and don't understand the intricate details of how much is "saved" by adopting that approach.

Is there a calculator (or can anyone manually) spit out some numbers for all taxes/NI, etc payable in the following examples:

1. £50k salary taken PAYE
2. £50k taken as £8,628 salary the rest dividends to Director

I was working to the assumption that the saving was pretty marginal (a few %) but with talk of £7,500 NI, I'm wondering if that's actually the case. Appreciated if anyone takes the time, I feel this might help in the re-framing process.

You can use the calculator here https://www.itcontracting.com/calculators/limited-company-dividend-tax-calculator-2019-20/

Bear in mind it doesn't take in to consideration the Corporation Tax if you're going down the dividend route, or the employment allowance (if entitled)

Also bear in mind to take £41 dividend + £9 salary (rounded to simplify) the business has to make £60k+ profit

A few other things to consider, I'll leave it to one of the accountants to do the sum for you

 

[Splatercash]

Using the calculator, and assuming the business makes £50,000 of pre-salary profit, I get the following:


Salary Route
Take £50,000 as salary.

TOTAL TAX & NI

Tax & NI paid by employee = £12,464

Employers NI = £5,708

Total = £18,172


Dividend Route

Take £8,628 as salary leaving £41,372. Pay 19% CT on £41,327 = £7,852

Take remaining £33,475 as dividends and pay £2,070 additional tax on dividends.

TOTAL TAX & NI

Corporation Tax = £7,852

Tax on Dividends = £2,070

Total = £9,652


Basically, £8,500ish better off a year taking £50k out of your business PAYE & dividends vs straight up salary with most of that being in the personal and employer NI contributions. Have I got that right? If so, wow, I had no idea it was anywhere near that much per year and I guess I can see why they have panned directors that take their renumeration in this way.

 

[Newchodge]

Using the calculator, and assuming the business makes £50,000 of pre-salary profit, I get the following:


Salary Route
Take £50,000 as salary.

TOTAL TAX & NI

Tax & NI paid by employee = £12,464

Employers NI = £5,708

Total = £18,172


Dividend Route

Take £8,628 as salary leaving £41,372. Pay 19% CT on £41,327 = £7,852

Take remaining £33,475 as dividends and pay £2,070 additional tax on dividends.

TOTAL TAX & NI

Corporation Tax = £7,852

Tax on Dividends = £2,070

Total = £9,652


Basically, £8,500ish better off a year taking £50k out of your business PAYE & dividends vs straight up salary with most of that being in the personal and employer NI contributions. Have I got that right? If so, wow, I had no idea it was anywhere near that much per year and I guess I can see why they have panned directors that take their renumeration in this way.

It is only very recently that dividends were subject to tax!

 

[Splatercash]

It is only very recently that dividends were subject to tax!

So, what you are saying is I should have got into the business game decades ago

 

[UKSBD]

Can you see now why I said in an earlier post why I wouldn't want to be the one shouting too loud about it

 

[Splatercash]

Can you see now why I said in an earlier post why I wouldn't want to be the one shouting too loud about it

Very much so. Shutting up!!

 

[manwithnonames]

Yes- it is a preferential tax position.

Most people will deal with it when they realise the govt makes 20% VAT from lots of risky ideas turned into billable revenue by small companies....all without lifting a finger.

VAT which goes into a pot the general populous are now accessing.

No one is stopping anyone else from turning their own ideas in to billable revenue via Ltd co. dividends - and with such a beneficial tax position available - it's surprising more people don't do it....

Anyone would think there's some sort of entrepreneurial ability required before you go collecting your guaranteed dividends with preferential taxation.....

 

[adam thompson1981]

Its definitely a raw deal as a director vs a sole trader in this situation but what can you do.

Lets just hope things get back to normal asap then we dont have to suffer with no income for too long.

 

[jameZee]

Somebody started a petition. Never know, if enough people shout about it, things may change:https://www.change.org/p/uk-parliam...ed_by_id=275e8500-f6ef-11e4-bb68-6b4692b5ae53

 

[Ian J]

Somebody started a petition. Never know, if enough people shout about it, things may change

The woman's maths is a bit one sided and if the petition ends up being widely discussed all it may achieve is a tax increase on dividends to level up the playing field