Question about sole trader vs ltd company

Discussion in 'General Business Forum' started by Beetle50, Aug 14, 2019.

  1. Beetle50

    Beetle50 UKBF Newcomer Free Member

    4 0
    Hey guys

    I’m in London and my work have suggested that rather than going through an agency they would take me on as ltd if I wanted.
    Sole trader apparently more tricky for them(no idea why) but the question I have is if I set up a ltd company for this purpose (being the owner and sole employee) how do I pay myself?

    I’m confused as was told I would only be able to pay myself dividends but all I want to do is receive my pay ph. Also, I only have a basic bank account as I’ve lived out the Uk for years, will this type of account be ok?

    Thanks guys, I’m really stuck as atm the business has no value but how do I determine profit etc? Man my head is spinning
     
    Posted: Aug 14, 2019 By: Beetle50 Member since: Aug 14, 2019
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

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    Salary by way of PAYE and dividends.

    Most company directors I know get paid by wages every month.

    Limited company should have a business bank account. It will need an account in its name.

    Profit? Let your accountant sort that out, just keep some money by for accountants fees, corporation tax etc.
     
    Posted: Aug 14, 2019 By: Mr D Member since: Feb 12, 2017
    #2
  3. Beetle50

    Beetle50 UKBF Newcomer Free Member

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    Thanks for the reply, definitely cleared main concern up

    Just a couple of quick questions I’m still mythed about:

    If I pay PAYE to myself, will I be taxed twice? Eg the invoice I hand into the people I’m working for the first time then also the wages I’ll be paying myself?

    I’m a bit concerned about the business bank account as I’m not sure I’ll get one hence the basic bank account at the moment.
     
    Posted: Aug 14, 2019 By: Beetle50 Member since: Aug 14, 2019
    #3
  4. STDFR33

    STDFR33 UKBF Big Shot Free Member

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    The invoice will be from your company. The payment will go to your company, and not you personally.

    Any profits that the company makes will be subject to Corporation Tax.

    If you take a salary, that will reduce the profit and therefore reduce the Corporation Tax.

    Dividends are available if there is sufficient post tax profits.

    The company will need a bank account in its own name. There are a number of non high street banks where you will be able to open an account.

    Unless you have the requisite knowledge and experience to produce compliant accounts and tax returns, you will need an accountant.
     
    Posted: Aug 14, 2019 By: STDFR33 Member since: Aug 7, 2016
    #4
  5. SteLacca

    SteLacca UKBF Ace Free Member

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    Posted: Aug 14, 2019 By: SteLacca Member since: Jun 16, 2016
    #5
  6. Beetle50

    Beetle50 UKBF Newcomer Free Member

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    Thanks guys

    Bloody hell, all I want to do is go in get paid lol. Do the work, invoice then go to the bank

    Online it’s pretty straightforward, HMRC, buy name, get registered then invoice. Sole trader is so much easier, not sure why they want ltd, any ideas?

    Thought it was easier than this, perhaps it is easy and I’m just scared by all this new language.
     
    Posted: Aug 14, 2019 By: Beetle50 Member since: Aug 14, 2019
    #6
  7. STDFR33

    STDFR33 UKBF Big Shot Free Member

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    Because of your employment status. You probably ought to be employed.

    By making you trade through a company, it shifts the responsibility from them to you.

    Perhaps working through an umbrella might work for both parties?
     
    Posted: Aug 14, 2019 By: STDFR33 Member since: Aug 7, 2016
    #7
  8. Maxwell83

    Maxwell83 UKBF Regular Free Member

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    I am guessing here, but it seems they don't want to employee 'a person' as they will then be liable for all the extra responsibility that comes with being an employer. I'm guessing they think that if you're a sole trader, its easier for HMRC (or you) to argue that you're an employee, but if they can pay a company or agency, they think they have avoided being an 'employer' (but that still may not be the case in reality depending on the nature of your relationship with them).
     
    Posted: Aug 15, 2019 By: Maxwell83 Member since: Aug 4, 2012
    #8
  9. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

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    If it is a job that is the amount of a normal salary then you need to question if this work is even worth while
     
    Posted: Aug 15, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #9
  10. ipswich24

    ipswich24 UKBF Contributor Free Member

    34 5
    Sounds like they're trying to avoid employing someone as has been mentioned.

    If you are self-employed or freelance and the bulk of your income comes from one source, then technically you are employed by that company.

    As an employee you'd be entitled to: Workplace Pension, Holiday pay, sick pay etc etc.
    By being Limited it would appear that they are trying to say that you maybe doing work for them but are not beholding to them so they have no liability to give you any amount of hours or pay and entitlements etc.

    I would question why they were doing this

    However if you wanted to run a company as a Limited company it really isn't that difficult... get a good accountant and they will help but essentially:

    You invoice people.. the money goes into you business account

    Each month or week you pay yourself via PAYE (your accountant can help with this) the minimum you need to keep under the tax personal allowance threshold... but still pay NI

    You can take dividends on any profits ... these can be taken monthly, weekly etc.

    Corporation tax is tax on the profit of your business

    Best advice is to get a good accountant... it really isn't that scary
     
    Posted: Aug 16, 2019 By: ipswich24 Member since: Dec 30, 2008
    #10
  11. SteLacca

    SteLacca UKBF Ace Free Member

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    Almost certainly to avoid secondary NI contributions. And any accountant worth their salt will see IR35 written all over this.
     
    Posted: Aug 16, 2019 By: SteLacca Member since: Jun 16, 2016
    #11
  12. Mr D

    Mr D UKBF Legend Free Member

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    If you do ever have a limited company charging the client for your services, don't forget to price accordingly to cover your holiday, pension, employer NI, sick pay etc that the client is not paying for an employee of their own business.
    Or as a friend put it once, sure I'll do a limited company. Price will be 50% higher for the same work.
     
    Posted: Aug 16, 2019 By: Mr D Member since: Feb 12, 2017
    #12
  13. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Why would you want that?
    Will they pay whatever you want to charge them for the work, as a real ltd company would do? Will they pay you enough to cover you paying yourself sick pay, holiday pay, pension entitlement, overheads, accountants' fees etc? When HMRC comes after you because you have been in disguised employment and have not paid the right tax and NI, will they pay the penalties for you?
    Why would you want that?
     
    Posted: Aug 16, 2019 By: Newchodge Member since: Nov 8, 2012
    #13
  14. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Sorry, I have just seen that this was an alternative to going through an agency. When the agency sues you for providing services to their client, contrary to their terms of service, will they pay the penalty?
     
    Posted: Aug 16, 2019 By: Newchodge Member since: Nov 8, 2012
    #14
  15. Beetle50

    Beetle50 UKBF Newcomer Free Member

    4 0
    Thanks for all the advice guys.

    Lots to think about. As to why they prefer ltd it seems pretty clear now. In any case, Ill continue with what i have at the moment and now I have a ltd company for work in my field I do have the freedom to now trade which I am happy about.

    Thanks again
     
    Posted: Aug 23, 2019 at 10:23 AM By: Beetle50 Member since: Aug 14, 2019
    #15