Setting up as a Ltd - Help!

(6 Posts)
Limited Mon 16-Nov-15 13:20:59

I'm hoping to get a temp/contract job through a recruitment agency, but they've asked that I set up as a limited company, or go through an umbrella company (which I'm not massively keen on but happy to be swayed otherwise if someone can convince me they aren't a rip-off).

Going Ltd is fine and I've put a note out to DH's accountant (DH is self-employed so thought I'd start with an accountant we know) but in the meantime, I wondered if anyone is around to chat things through with me. If the job comes off I need to get things set up pretty fast.

I've earnt £19k so far in the 2015/16 tax year. This new role is paying £600 per day and is expected to last 3-6 months. I'd be working full time (minus the odd day's leave and Christmas etc).

Through googling I've seen that it's beneficial to pay myself a small salary to keep NI and tax obligations to a minimum, and then can pay myself in dividends. I understand the general gist of this, but do have a few questions:

- Are dividends considered an expense (ie tax deductible)? Or do I pay corporation tax (at 20%, right?) first and then can pay the dividends after that?

- Are there any tax benefits to getting DH 'involved', as a Director or Shareholder or Co Secretary etc etc? He's a tradesman and what he does is completely unrelated to what I do. He has an income from his own work but he may reduce his hours a bit if I get this job.

- Can I expense my monthly season ticket (approx £450)? I would be based in the client's office most of the time, with the odd day at home. I know there'd be a few other odds and sods, but this will be my biggest expense.

- Is it ok to pay out all profits as dividends and how often can I pay them out? I'm providing a service so will have very limited reason to buy anything or reinvest in the business (the client will provide a phone and laptop).

- Is there a way of seeing how much I'll actually take home? Working on the assumption that I'd earn £60k in 6 months....

Thank you so much in advance!

kjwh Mon 16-Nov-15 14:08:58

Firstly, make sure the accountant is well versed with personal service companies - many aren't!

Main thing is whether IR35 applies or not. If it does, you can kiss goodbye to the idea of paying a small salary and high dividends and also to involving your DH. You need to have the contract reviewed by a specialist such as QDOS and NOT by a bog-standard accountant - it's a specialist area.

You havn't mentioned VAT - it is almost certainly beneficial to register for VAT and even moreso to adopt the flat rate scheme. Something else for you to google and talk to the accountant about.

There is potential for your DH to be a co-director and joint shareholder - all depends on his tax status. If he's already a relatively decent earner, then probably little benefit, but if he's a low earner, then probably scope for paying payroll and/or dividends to him. Again, one for the accountant.

Dividends aren't an expense. You pay corporation tax on profits and can pay dividends out of what's left.

For a personal service company, a good accountant is worth their weight in gold. They can set you up with a decent book-keeping software (industry standard for contractors is Freeagent) and can do the formation, tax registrations, etc for you. It can all be done quite quickly and cheaply, so don't allow yourself to be ripped off!

Limited Mon 16-Nov-15 15:17:01

Is a personal service company different from a limited company?

I've seen mention of the IR35 thing - sounds a bit grim. How would I know if it applies?

I saw something about the flat rate VAT scheme and guessing I'd fall under the management consultancy category. Not quite sure how the VAT side of things works thicko so will google more.

Accountant said fees are approximately £600+vat but would be easier to discuss over the phone rather than fb grin

DH earns approx £30k gross atm.

Thank you v much kjwh flowers

kjwh Mon 16-Nov-15 18:39:26

A PSC is simply a limited company where you sell your personal services, i.e. contracting, rather than goods or other staff.

Re IR35, there are plenty of firms that offer contract reviews such as Qdos - that's how you find out, you get them to review your contract and working practices. It's the first and most important thing to know and the answer to which will guide you further through the process of using your own limited or an alternative vehicle such as an umbrella company.

Limited Mon 16-Nov-15 18:41:13

Oh blimey, sounds v complicated - no contract and no official working practices!!

kjwh Mon 16-Nov-15 18:41:36

£600 is about the norm for ltd year end accounts only. By the sound of it, you'll also need help to form it and register for the taxes, the monthly payroll submissions, quarterly vat returns and your own year end personal tax return. You need to get a more comprehensive quote for the full services needed. Don't try to do the other things yourself unless you have plenty of time to research - limited companies aren't for amateurs!

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now