Anyone else screwed as a limited company couple ?

[totallysurreal]

We are a limited company - myself and DH. I'm really concerned, because it doesn't look like there will be any work for DH after this week. I'm off already as looking after the kids.

Our accountant said there is nothing we can claim apart from try for universal credit. I saw Martin Lewis said we can claim 80% if any salary paid via PAYE as if employed. Sadly we only paid ourselves the under the tax threshold amount each ( around 12k a year.) I only get that as we have small children so my work is minimal, but my DH draws dividends of varying amounts depending on what he's been charged out at and that's come in.

We do not have savings and won't be able to pay our mortgage with no work. I do not know what to think. This has always been an issue any sick or holiday periods for DH and we are screwed, no reserve. We live a very frugal life already - one car between us- no sky - no holidays ever- no weekends away- occasional bag of chips but no meals out etc.

Any one else in a bad small limited company situation due to Coronavirus?

What does the business do ( in case I can suggest something based on this) ? You should get 1,600 gross total per month plus the universal credit then. Can you apply for a mortgage holiday with the bank if that is the difficult bill?

Yep we are in same position as a small limited company. Stressed but taken mortgage breaks and worried

You can furlough your 12k each. So get around 19k joint income. You'll have to not work though- so close down the business completely got now.

Then apply for universal credits. You'll get extra on top. Take a mortgage holiday. You can also use some of the tax you were due to pay, since you have a 6 month extension on that.

Sort of. We now have zero coming in but managed to build up a decent warchest over the last ten years of trading.
I feel for the newly self-employed, they're screwed, but those who have enjoyed a few years of minimum wage/dividends should have known and factored for the risks of not getting any work.
You can't be rewarded as a risk-taking entrepreneur one day, and fall back on the State the next.

We are but DH takes the £12000 a year but I only take £3600 so we'll be furloughing him but I'll still be able to answer the phone and phone customers if necessary

And yes our first priority when we first started trading was to build up enough savings to be able to live for a year should something happen. At the time the main thought was sickness but this counts.

I do appreciate this puts us in a very privileged position

People have misunderstood the benefits of paying tax for a long time and unfortunately it's coming home to roost.
You chose the option of paying less to the state and that's left the state the option of now only being able to pay less to you.
Other groups of self employed people are much more vulnerable because they aren't relying on dividends normally but working pay cheque to pay cheque

@totallysurreal you should be at least able to get a mortgage holiday. If you have premisis you will get 1 year holiday of business rates and you may be able to access business loan via high street banks. Are you eligible for small business grant?

No premises. We provide a specialist face to face service, like being a trade like plumbing for businesses, but not that. It's very niche. Our mortgage is £1400 a month .. we are in the dreaded South east in a tiny property not a mansion. .. in fact we moved further away to get a cheaper property.
I know people think dividends is tax avoidance, but it's legal and you do still pay tax. I think it's very harsh to say it's our own fault for paying this way. It's not like we've taken cash in hands Who could of predicted this situation ? Our income is not the same each month, but there is always something coming in usually.

We had some savings before the kids but DHs long hours mean it's hard to both work the same as pre kids. So basically we don't have any how.

Yes we could spend the tax money but once it's spent and we still owe it we will be in as much trouble.

There is nothing we can do.. a mortgage holiday will give some time.

I've always found it immoral that people did this, it's basically a legal tax dodge, when so many of us pay our way. I know people who do this, get huge dividends and were also claiming certain benefits.

Sorry you don't like this opinion but you can't have it both ways!

Limited co here, but did you put in any directors loans ? This money can be paid back to yourselves

Agree. There are pro's and cons of being self employed, or setting up your own ltd company, verses PAYE. This is one of them!

I know people who do this, get huge dividends and were also claiming certain benefits.

I would love to see how that works on paper because dividends is still income and declared on self assessments.

Also it's not that much more tax efficient. I'm pretty sure the profits are taxed at 20% within the company and then taxed again at various rates (something like 7%, 34%, 37% etc).

Only reason I know is because I thought exactly the same thing too. I'm self employed and was looking into what going Ltd would save me, and the effect was negligible.

The only reason I can see for doing this is if your income really fluctuates and you want to pay yourself a small set salary and see how it goes regarding profits, or you want to keep profits invested in the business.

It's not always just about the tax dodge.

@Didkdt and @circleorsquare do fuck off. People don’t always choose to set up as a Ltd Company as a tax dodge, many Ltd. Companies trade that way because it is the legal framework which is most appropriate to their circumstances.

Last year overall I paid £500 less tax than an employee on the equivalent salary, in return for which I get no sick pay, pension contributions, paid holiday, adoption leave, enhanced maternity, have no employment rights and have 0 job security.

The reason that I have a limited company, because the only way I can do my job part time is as a freelancer, and my central and local government customers insist that I work via a Ltd. company.

The OP is worried and struggling and here you come having a pop and gloating because you think she’s “got away with something.”

If taking dividends wasn't advantageous financially then people wouldn't do it.

As a pp said, you chose to pay less into the system when it suited you, and now the system pays you less. That seems fair enough to me.

Yeah, DH is but still managing to work a bit. Just sending solidarity. We have some savings as DH cashflow can be challenging. Totally understand why you haven't though - it's crushing trying to get by in the SE particularly. Feels like trying to do the right thing constantly - taking care of kids, working, getting a stable home - and always being on the edge of disaster. We've had a couple of slowdowns coming up to Crexit cliffedges so been working in this crisis mode for a while now. Fingers crossed it doesn't last too long.

Crexit? Brexit of course!

@totallysurreal One you can be furloughed, although the other will need to stay on to discharge your duties as a director and do the income generating work when you start back.

If you have a mortgages can you apply for a holiday, or ask to pay a smaller amount over a longer period.

You can defer your July payment on account too so that should free up some cash for the next few months.

It’s just a shit situation though.

Furloughed on 2 x £12,000 is not bad. Do that, mortgage holiday and knuckle down with other expenses.

Not to rise to the bait, but most of us in limited companies pay accountants. So that is an expense you don't have as an employee. If I am minted due to operating this way then I certainly don't feel it.

My mortgage company will give 3 months mortgage holiday, of course that puts up the mortgage slightly each month then after and I can't see there being any work for next 6 months or so

@Thesuzle no directors loans. I can't be furloughed, as I have an existing work commitment each month that is still going ahead. The income for this is small, but I will have penalties if I pull out.

Well said @FairyBatman.

OP could your DH not take the 80% furlough? He will get about £800 a month if so and you will obviously have some income from the existing work commitment you mentioned above. Added together is that enough to tide you over?

I’m in a very similar position by the way (run my own ltd company) and it’s extremely scary. I’m having sleepless nights about my business going into permanent closure and losing my home, so I know exactly where you’re coming from.

You chose the option of paying less to the state and that's left the state the option of now only being able to pay less to you.

This.

My husband is in the same boat. I want to tell the “told you so” people on this thread to fuck off. It’s not helpful. Being a limited company is a very normal thing to do, it’s perfectly legal and of course nobody knew a global pandemic would completely shaft us.

My husband is not ltd to “avoid tax”. He pays an awful lot out in taxes actually. A lot in corporation taxes. It’s not his reason in being a limited company. We are certainly not rich. Far from it. His work has completely dried up. He is dependant on events happening (they are all cancelled), businesses being open (they are all shut)

If we really do pay less tax wouldn’t it be better to work out how much less as a percentage? Could we not get offered the same amount as self employed people minus the percentage that we “avoid paying”

There are lots of supermarket jobs being filled now OP.

All these people who are being smug and telling you that it’s your fault for taking dividends and a small salary - I don’t believe that if they were able to pay less tax in return for higher risk in a perfectly legal and HMRC administered scheme they would refuse to do so.
I don’t have an answer for you OP, I’m sorry. We are in a similar position but luckily our main contract is with the govt and deemed “essential “ so we are ok for now, although we have lost our other 2