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?

I am in the same position - people sadly do not listen when you explain that you are paying tax on the profits, paying employers NI AND paying tax on income - all they see is the reduced tax on income, as some of the income is via dividends.

We are similarly screwed in terms of income, but better than some... the 80% income is far too small for what we need to pay the bills, BUT coupled with the savings we do have (not enough I suspect...) it may be enough to keep us able to function for an extra month or so. Being honest, the 80% is far more than I thought the Government would actually do.

We (my partner and I) chose to work this way, chose to take a risk in the style of work we have done, and now are having to pay the price. Bloody awful having built a company up - but I keep telling myself better than being on a ventilator... Not much, but the best I can do.

One last thing... I hesitate to suggest this, but it MAY be an option. You could give yourselves a pay rise from within the company, and then claim 80% of that? The process will be (I think) that you simply put a claim into HMRC - what checking/validation they will be doing (if any), not sure. Not something that sits well with me, but if it is that Vs losing your business, you may not have much choice

Best of luck

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)

It is massively tax effecient especially above £50k and even more at 100k ( marginal tax rate of 63% anyone)

So many people in here have no idea how a ltd company works, do you really think we don't pay into the system? I pay corporation tax, do any self employed and any employees do that? Course not! But let’s ignore that as it doesn’t fit the ‘serves you right’ rhetoric. Then I pay tax on dividends aswell. These are not cash in hand or under the table payments that some people in here seem to think they are. I also pay NI, tax and pension contributions for my employees. I don’t get the benefit of a pension however. I pay everything above board exactly as I should and I most certainly pay into the system. I also pay an accountant every month to ensure everything is correctly filed etc. Again, employees don’t have that expense.

(Not having a go at you but) technically it is the Ltd company that pays corporation tax and there's a bit more flexibility in what you can do with losses. C tax is a low figure too.

I think (hope) the fallout from this is an overhaul of the tax/ni system. One unified tax would be better.

I wish the people slamming limited company for using dividends actually educated themselves - there is a small benefit in terms of taxation but a huge risk in terms of no sick pay , no holiday pay , no ssp , no maternity pay , no pension. Most of the people having difficulties haven’t been on huge levels of income via dividends and probably earn little or no more than someone employed.

Be kind eh ?

I want to tell the “told you so” people on this thread to fuck off.

Same here. I wonder how many of these idiotic posters claim they support small businesses, many of which will be limited companies run by one or two people. Total hypocrites the lot of them.

I wish the people slamming limited company for using dividends actually educated themselves - there is a small benefit in terms of taxation but a huge risk in terms of no sick pay , no holiday pay , no ssp , no maternity pay , no pension.

Well said @mrsbyers

It is technically the ltd company who pays corporation tax but when you are the sole director of the ltd company it’s one and the same thing.

It’s a horrible situation. Still with universal credit, mortgage holiday and furlough of op you should be able to get by until things improve.

I do think there is something in what pp have said about tax avoidance though. If you pay less in you should expect less out. Paying yourself in dividends above the tax free threshold means you pay less tax (mainly because no NI is due). If you choose to do that, I think it’s fair you get less back in times like these.

But you aren't relying on your pay sick, holidaying on maternity or not you rely on your dividend.

This is a terrible time for a lot if people, self employed, zero hours, employed the retail sector. None of them have benefited from dividends whilst they paid tax and NI. Many of them can't be Furloughed

@Mrstumb clearly no one is saying being a limited company is illegal !!!! and clearly, paying yourself very little salary to avoid taxation which you already know isn't enough for your actual spending is the part people aren't happy with...

No limited company would be here complaining had they actually paid themselves the salaries they spend per month, and paid their taxes like all other people do

Sorry but I think you're being a bit greedy. 80% of £24k is a lot more than many people live on already. If you defer tax and arrange a mortgage holiday you should be able to manage.

You can furlough both of you and still claim universal credit, it's not one or the other. But on 20k you probably won't get UC.

You can apply for a mortgage holiday.

You can also apply for a business interruption loan which you wont make payments to for 12 months.

Withdraw any capital currently in the business as a dividend.

Take payment holidays on finance or credit cards etc.

Exactly you put less in you take less out. That applies now as much as in normal times. But everyone needs to be saving as well. It's common money aware advice that you need savings and the British are the worst in Europe for saving if you are taking dividends save from them.
Lots of people are scraping by at the best of times shift workers retailers hospitality, even barristers (especially newly qualified) cleaners, the list goes on are all going to be finding it hard to be Furloughed at least as a limited company you can get something from your PAYE

WhatdoImean
Increasing your salary now wouldn't work, as the 80% is based upon your salary at 28th February, 2020.

There was a piece on R4 more or less just now. You are a recognised gap in the welfare provision but given they are giving nothing to SE people with profits >£50,000 I'd expect any company making profits > £50,000 won't be helped.

It is massively tax efficient especially above £50k and even more at 100k ( marginal tax rate of 63% anyone)

The ceiling would be at 50k (as it is with the SE support) so the really lucrative businesses wouldn't be eligible. And at 50k per year there isn't a lot of opportunity to build up tax reserves (Once you've covered insurance, accountancy costs, professional memberships etc)

As has been pointed out, if you chose to take advantage of (yes, legal, I will point out) ways to pay less tax, then you can't complain now. Sorry but you cannot really expect a lot of sympathy at this time.

I am in a similar position - me and my partner run a business together and we have no idea how we will be affected as it depends on how long all this lasts.

We've been paying ourselves a full salary (not just dividends) but I'm now going to have to drop it to the absolute minimum because we don't know when we'll next have any money coming in. Furlough is not really an option for us as we can't just stop working altogether - when you run your own business you can't just down tools overnight. I guess one option is that we could furlough one of us.

And if you've never run your own business then please stop with the lecturing about dividends. No sick pay, no pension, no maternity leave. When we started our business we had to pay ourselves a minimal salary and take dividends because we had genuinely no idea how much money we would make month to month.

One thing that has saddened me about the whole coronavirus is the sheer nastiness some people have toward the self employed and owners of limited companies. The revelling in someone’s misfortune by some posters. The root of it is pure and utter jealousy

Also some poster need to do their research about limited companies before they spouting off

So basically you tried to avoid paying tax.