Private Education through Limited Co?

[DesignerNick]

At the minute both me and my wife work full time.

I am thinking about a way to possibly do some work outside of work (not related to work or conflict of interest) and if I do too much it is going to take me into the next bracket of tax.

Ideally, if we could pay for our daughter's education through a limited company I could setup a limited company and put any earnings through there and then pay for school fees as an expense and it would could down on corporation tax?

I understand this would be a benefit like a company car, so how much tax would need to be paid as a director for the benefit of paying for schooling through the limited company?

Is there a legit way to do this?

 

[STDFR33]

It would result in lowering the corporation tax, but would be earnings so would not save on tax.

If you are not already receiving dividends, then you could make use of the £5000 allowance, and pay the school fees personally. But running a limited company has costs that would probably outweigh any savings.

Some figures needed for a decent answer. Worth talking to your accountant about this.

 

[DesignerNick]

I dont have a limited company at the minute so it was an idea of the way to get setup.

School fees would be around 650 - 700 a month.

Currently earning 30k through employment and would aim to earn around 1,000 a month minimum through the limited company. The only worry is about the tax bracket at 43,001 that I will more than likely go over this.

Wife currently earns around 13k, ideally we would be able to make it so she could cut her hours down a lot as she mainly works to pay the school fees.

 

[STDFR33]

Higher rate tax kicks in at £43k.

With £30k employment income and £12k self employed income, you'd still be under higher rate taxes.

 

[DesignerNick]

Sorry, I have just updated it.

That would be a minimum of £1k per month, so it may go over if there were some bigger jobs

 

[STDFR33]

Just because you go over won't mean that brings all your income to higher rate. It just means the element of income that is over will be subject to higher rate taxes.

A partnership if you have a wife might be worth exploring.

 

[DesignerNick]

Yes I am married and my wife has a lot more space for manoeuvre.

When you say the element of income, will it not mean that all my earnings go to 40%?

 

[STDFR33]

If you earn £45k
£43 subject to basic @ 20 %
£2k subject to higher at 40%

 

[DesignerNick]

Oh so it is only the money you go over that is charged extra rather than all of it? I might book an appointment with a local accountant to go through everything!

I guess self employed I can then claim a few things back and it is only the taxable profit I am taxed on the same as a limited company? ie expenses, materials, any sub contractor fees etc.

Thanks for your help!

 

[STDFR33]

Oh so it is only the money you go over that is charged extra rather than all of it? I might book an appointment with a local accountant to go through everything!

I guess self employed I can then claim a few things back and it is only the taxable profit I am taxed on the same as a limited company? ie expenses, materials, any sub contractor fees etc.

Thanks for your help!

Yes as a sole trader you are taxed on the profits and subject to income tax, class 2 and class 4 national insurance.

Just noticed that you are in Coventry. Might be worth speaking to @kevin.doran . He's based in Coventry and is a respected forum regular

 

[DesignerNick]

Thanks, it won't be 1000 a month profit as there will be cost so I will more than likely still be able to fall within that.

I'lll look into doing it that way!