Sole Trader Vs Ltd Company - change of advice?

[paulears]

Over the years when people ask the question the responses are usually "it depends" and then we explain the advantages and disadvantages of both. Clearly now - the status of self-employment has taken a huge nose dive. Just watched a Minister ducking and diving on the support being given to the self-employed. If it wasn't so serious, it would have been funny.

From here on, it's clear that Limited companies with a PAYE single Director are being treated as a 'proper' business, and my status of self-employed is obviously much, much lower in status and unsupported in times of trouble. I guess a status change now is too late for this outbreak, but if/when things return to normal, I think I'd like to at least feel like a member of the normal working community instead of some kind of incidental person - which is how I feel at the moment. I'd planned to retire in a couple of years time, but that's way, way impossible now - it's going to take a few years for me to build my savings back up. I'm not going to go and rant on facebook like many are, but the system in the emergency has revealed quite a few interesting facts. Some jobs are essential, some are not. Many of the essential workers are the lowest paid, and now at the highest risk not being able to isolate as the rest are. When this is over, who cannot support these often minimum wage people claiming better pay because the evidence proves they're more worthy than others. Lots of thing will change once panic subsides and anger replaces it. How many businesses can recover? Time will tell.

My son is a Police officer and he's working away from home coming home weekends - now he's thinking it's safer to stay at work.

What worries me in my business is that my income depends on people spending on entertainment. When the virus is blown out, their first response may be to recover what they've lost, not go out and see shows. My business will be dead for far longer than many others. Just how it will be. Very sad.

 

[LTDcompanier]

Are people who went down the LTD company route any better off, under the measures announced so far, than sole traders?

Will a LTD company director, who is also the sole employee of their company, who takes a tax efficient salary of £8600 a year (plus dividends) get any help from the measures announced for regular employees on Friday?

 

[Newchodge]

Are people who went down the LTD company route any better off, under the measures announced so far, than sole traders?

Will a LTD company director, who is also the sole employee of their company, who takes a tax efficient salary of £8600 a year (plus dividends) get any help from the measures announced for regular employees on Friday?

Yes, they should get 80% of 8,600 if their company has no business. Taking the tax advantage of dividends for years is not now shown to have been a good thing in the current crisis. so be it. You made a choice.

 

[UKSBD]

Yes, they should get 80% of 8,600 if their company has no business. Taking the tax advantage of dividends for years is not now shown to have been a good thing in the current crisis. so be it. You made a choice.

I always had a tinge of guilt about doing it, in good years, I would pay up to the tax threshold even though my accountant said I should pay myself lower.

In my opinion the Government should have done something about it years ago, it's so obvious people only do it to avoid the NI

Wouldn't mind betting there will be big changes once we get through this, just hope they are not retrospective.

 

[mattk]

Yes, they should get 80% of 8,600 if their company has no business. Taking the tax advantage of dividends for years is not now shown to have been a good thing in the current crisis. so be it. You made a choice.

Do we know that for sure though? Are there no restrictions on the types of businesses, number of employees etc.?

Do we even know HOW companies will receive the payments? I can't see them handing out blank cheques. If I was cynical I'd say it will come in the form of Income Tax and NI holidays, which isn't going to help with immediate cash flow.

 

[LTDcompanier]

Yes, they should get 80% of 8,600 if their company has no business. Taking the tax advantage of dividends for years is not now shown to have been a good thing in the current crisis. so be it. You made a choice.

Thanks.

So a Sole Trader would get 80% of their full month's salary?

But that hasn't been announced yet and will come on Monday?

 

[Mr D]

Thanks.

So a Sole Trader would get 80% of their full month's salary?

But that hasn't been announced yet and will come on Monday?

Not sole trader. Employee.

 

[LTDcompanier]

So nothing for sole traders yet?

 

[Mr D]

So nothing for sole traders yet?

Not yet.

However you appear to be a company director, not a sole trader.

 

[Newchodge]

Thanks.

So a Sole Trader would get 80% of their full month's salary?

But that hasn't been announced yet and will come on Monday?

No, currently a sole trader will apply for univesal credit.

 

[Newchodge]

Do we know that for sure though? Are there no restrictions on the types of businesses, number of employees etc.?

Do we even know HOW companies will receive the payments? I can't see them handing out blank cheques. If I was cynical I'd say it will come in the form of Income Tax and NI holidays, which isn't going to help with immediate cash flow.

There are no restrictions on business type. No restrictions have been announced about number of employees.

I anticipate payment will be by reverse HMRC payment - in place of the employer paying tax and NI after submitting RTI, they will receive money.

 

[Chris Ashdown]

There are no restrictions on business type. No restrictions have been announced about number of employees.

I anticipate payment will be by reverse HMRC payment - in place of the employer paying tax and NI after submitting RTI, they will receive money.

But how long will it take to have any refund in place starting from scratch maybe a couple of months or more. at present they will have nothing set up on the computers to check even the monthly average PAYE to use 80% of and make a payment so dont expect a payment anytime soon

 

[Newchodge]

But how long will it take to have any refund in place starting from scratch maybe a couple of months or more. at present they will have nothing set up on the computers to check even the monthly average PAYE to use 80% of and make a payment so dont expect a payment anytime soon

They have said end April, backdated to 1 March.

RTI has been in place for at least a couple of years, they know exactly what every employee gets paid, every time they get paid.

 

[mattk]

Does anyone know if furloughed employees are allowed to work for a different company during the period the government is supporting their 80%?

 

[Newchodge]

Does anyone know if furloughed employees are allowed to work for a different company during the period the government is supporting their 80%?

It's not yet clear. If it is an associated company I would say definitely not as they would have continuous employment from the old company to the new.

 

[LTDcompanier]

Not yet.

However you appear to be a company director, not a sole trader.

Yes I am.

But I am wondering if I would've been better off doing the self-assessment thing and not becoming a LTD company.

But it looks like those who went down the LTD company route and took the tax efficient salary of £8k are being better looked after than those who are sole traders - which doesn't seem right, as the sole traders pay full tax (rather than the lower rate on dividends that LTD company directors can pay).

 

[Mr D]

Yes I am.

But I am wondering if I would've been better off doing the self-assessment thing and not becoming a LTD company.

But it looks like those who went down the LTD company route and took the tax efficient salary of £8k are being better looked after than those who are sole traders - which doesn't seem right, as the sole traders pay full tax (rather than the lower rate on dividends that LTD company directors can pay).

Both directors and sole traders pay full tax.

Just there are some differences between them.


HMRC are pretty good at chasing those not paying full tax in order to get them paying.