Working out surplus cash figure for Ltd co - help !

Discussion in 'Accounts & Finance' started by VictoriaZaZ, Mar 16, 2019 at 11:54 AM.

  1. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    I'm facing a decision of whether or not to incorporate my sole trader business. It's all new territory for me and so many Q's are popping up. The following "hypothetical scenario" is how things would look if I incorporated.

    2018-19 turnover of 90k, less expenses of 12k so net of 78k

    Less director's salary 8, 400 = net profit for company 69, 600

    Corporation tax of 19% on this figure = 13, 224

    Therefore net profit available for dividend = 56, 376

    HOWEVER, by having a net income to an amount below this - he has it as 3, 659 net monthly income, comprised of circa 700 salary and the rest in dividends), it means I would not take out the maximum. It would equate to £43, 908 in the year .

    What I am trying to work out is what exactly is the amount I would have "sitting in the account" as "surplus". There are so many sums and I am getting confused.

    I'm "assuming" that if we take the 78k net figure at the top, we then deduct the 13, 224 tax paid and also deduct the 43, 908 paid via combo of salary and dividends ?

    This leaves £20, 868 surplus. Am I correct in my methodology ?

    Thanks :)
     
    Posted: Mar 16, 2019 at 11:54 AM By: VictoriaZaZ Member since: Mar 15, 2019
    #1
  2. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    9,980 2,026
    Just a question are you vat registered?
     
    Posted: Mar 16, 2019 at 12:08 PM By: Chris Ashdown Member since: Dec 7, 2003
    #2
  3. Mr D

    Mr D UKBF Legend Free Member

    12,464 1,316
    Is there any reason why you would want to take out the maximum in any one year?
     
    Posted: Mar 16, 2019 at 12:15 PM By: Mr D Member since: Feb 12, 2017
    #3
  4. VictoriaZaZ

    VictoriaZaZ UKBF Newcomer Free Member

    19 1
    I won't be taking out the maximum though if there is surplus left in.
    But if you a referring to the 43, 908. YES
    Around 25 k of this would cover basic living expenses, the rest I can move into my savings account. I can't add to my mortgage deposit savings if everything beyond basic costs are locked into a Ltd company....

    Also, Halifax will factor in the combined figure of salary and dividends when working out what they can lend for a mortgage. When I buy a house, it will only be me applying so I need to have a decent income or I won't get a decent mortgage. I don't need any large cash sums locked up in the business as I have no need to keep funnelling funds into the business, it's a service industry with no capital overheads. It runs itself. I'll only be keeping the surplus locked as I would lose out on tax savings otherwise

    And for the person who asked about VAT - no. I have to need to be as most sales come from USA, not here in the UK.
     
    Last edited: Mar 16, 2019 at 12:54 PM
    Posted: Mar 16, 2019 at 12:25 PM By: VictoriaZaZ Member since: Mar 15, 2019
    #4
  5. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    9,980 2,026
    I am then probably wrong, but i thought it was all sales turnover regardless of where its from
     
    Posted: Mar 16, 2019 at 4:57 PM By: Chris Ashdown Member since: Dec 7, 2003
    #5
  6. UrbanRetail

    UrbanRetail UKBF Regular Free Member

    166 44
    I'm of the understanding that services supplied to businesses are excluded for UK VAT purposes, but services supplied to consumers should be included.

    I've never dealt stateside so I'm probably wrong also.
     
    Posted: Mar 16, 2019 at 5:08 PM By: UrbanRetail Member since: Mar 3, 2012
    #6
  7. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    5,004 1,422
    Whether the customer is business or consumer is irrelevant as far as Vat is concerned
     
    Posted: Mar 17, 2019 at 6:43 AM By: Ian J Member since: Nov 6, 2004
    #7
  8. MikeJ

    MikeJ UKBF Big Shot Free Member

    5,560 1,584
    It's turnover that isn't VAT exempt.
     
    Posted: Mar 17, 2019 at 11:16 AM By: MikeJ Member since: Jan 15, 2008
    #8
  9. Newchodge

    Newchodge UKBF Big Shot Free Member

    11,316 2,901
    Should sales to USA not be zero rated, rather than exempt?
     
    Posted: Mar 17, 2019 at 11:29 AM By: Newchodge Member since: Nov 8, 2012
    #9
  10. Adam93

    Adam93 UKBF Regular Free Member

    231 42
    Your methodology is okay. You will have income tax to pay on the dividends though.

    On incorporation, you are likely to have a director's loan to the company (depending on how it is structured). Repayment of a director's loan will be more advantageous that dividends. You need a sit down meeting with an accountant to guide you through the process. Once incorporation is completed you could possibly DIY, but get help with the incorporation.

    As for VAT, services provided to US businesses will be outside the scope of UK VAT (if consumers UK VAT will apply). Sales of goods to the US will be zero rated and therefore count towards the registration limit - with the level of expenses, I presume it is the former (services) rather than goods, so you are okay as long as your customers are businesses. However, it may be more beneficial for you to voluntarily register if this is the case.

    With VAT there are always exceptions to the general rule, so without further information, no one can say for sure.
     
    Posted: Mar 17, 2019 at 12:37 PM By: Adam93 Member since: Jan 18, 2018
    #10
  11. MikeJ

    MikeJ UKBF Big Shot Free Member

    5,560 1,584
    Posted: Mar 17, 2019 at 9:40 PM By: MikeJ Member since: Jan 15, 2008
    #11
  12. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    1,019 214
    Sales of goods outside the EU are zero rated, not exempt.

    Sales of services to businesses - and some B2C supplies - outside the EU are outside the scope of UK VAT, not exempt.

    The above link does suggest that both can be excluded when calculating your turnover for the purposes of the registration threshold though.
     
    Posted: Mar 18, 2019 at 10:06 AM By: TheCyclingProgrammer Member since: Jul 15, 2014
    #12
  13. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    12,500 2,327
    The surplus will be the profit after tax ie available to pay as dividends less dividends paid.
     
    Posted: Mar 18, 2019 at 10:29 AM By: MyAccountantOnline Member since: Sep 24, 2008
    #13