New business help needed!

[crombie13]

I am considering making in roads into opening a car repair garage with an eventual view of carrying out MOT's after a year or two.

In the beginning I will be working solely on my own so therefore is it best to operate as a sole trader? Also, can you obtain a business bank account as a sole trader? What taxes etc would I have to pay other than the standard income tax?


I have thought of an idea to raise capital but not sure if people will go for it or not.

As I already do car repair for a number of people and I have a very large network of friends/assosciates I was thinking of trying to obtain £150 from 150 of these people which would give me £22500. This would cover my yearly rent/bills (£10500) and give me some money for equipment etc. In exchange these 150 people will receive 2 x car services, 1 x MOT (£3750 as I will have to outsource them initially) and 20% off their labour costs for any additional work in the first 2 years.

Has anyone done anything like this before? Is there anything I should change or be aware of?

Thanks in advance for any help/advice!

 

[cfgammo]

I would suggest you go LTD you are buying parts I gather and have some over heads and in the long term you want to employ.

Self employed you will pay income tax and national insurance this is cheaper then if you where employed.

You will need to charge VAT if you earn over certain limit I forget what it is I think it's over 65K google that.

If you go LTD you pay Corporation tax on your profits then you draw a wage from the business it's best to pay your self near the minimum wage then draw the rest of your money as dividends from the business quarterly. This a good way to lower your tax bill.

In-short these two methods are similar in terms of what you will take home only that LTD is more complex and you will have more fees with your accountant. But with self employed any debts you get into will be your personal debts with the LTD the debts are only the business which is why it's called limited liability because you are not liable. It's more complex than that but that's the jist.

 

[crombie13]

I would suggest you go LTD you are buying parts I gather and have some over heads and in the long term you want to employ.

Self employed you will pay income tax and national insurance this is cheaper then if you where employed.

You will need to charge VAT if you earn over certain limit I forget what it is I think it's over 65K google that.

If you go LTD you pay Corporation tax on your profits then you draw a wage from the business it's best to pay your self near the minimum wage then draw the rest of your money as dividends from the business quarterly. This a good way to lower your tax bill.

In-short these two methods are similar in terms of what you will take home only that LTD is more complex and you will have more fees with your accountant. But with self employed any debts you get into will be your personal debts with the LTD the debts are only the business which is why it's called limited liability because you are not liable. It's more complex than that but that's the jist.

How much is corporation tax? And would I still have to pay income taxx for the bbusiness or only on the wages I draw from it?

 

[cfgammo]

You will pay 20% Corporation Tax on your business profits, then as an employee is you pay PAYEE income tax and national insurance. Then if you draw dividends you get tax 10%. If you have good accountant he will make sure you set your wages so that Corp TAX and PAYEE and dividend tax is as close to what you would take home from self employee as possible with the security of being LTD.

 

[webgeek]

When you have a high percentage of your relative revenue being generated by labour, as opposed to material costs, it's worth considering traditional VAT vs flat rate VAT scheme.

Going LTD definitely makes a lot of sense. You have flexibility for growth and protection in case something goes awry.

 

[The Wages Room]

I used to be in practice but now run a payroll bureau. I would definitely suggest that you talk over ltd co v self employed with an accountant. It is more expensive in lots of ways to be a limited company when profits are low but you do have protection. Lots to think about that can't really be addressed through the confines of a forum!

So ring a local accountant is my suggestion. PS not me as I no longer practice!