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 do think there is something in what pp have said about tax avoidance though. If you pay less in you should expect less out.

If directors paid themselves fully in wages/PAYE, they'd pay twice as much NIC as a sole trader or employee earning the same, because they have to pay BOTH employee AND employer NIC contributions, totalling a whopping 25%.

So, do you think a director paying twice as much NIC as an employee on the same wage gets twice as much in potential state benefits? No, of course not, they still get less entitlement than an employee.

Until the pandemic, there was bugger all benefit for a director to pay themselves a higher wage and 25% nic on it. Why would they do it?

Of course, for those with a damn good crystal ball, who knew a pandemic was about to happen, and knew exactly what support the government of the time would provide, then they'd have know that paying a higher wage and suffering double NIC was going to be worth it wouldn't they????

Meanwhile, everyone else made decision based on the LAW at the time, which allowed for a mix of wages and dividends to be paid. Note this is no loop-hole - it's been standard practice for over 25 years which HMRC, Treasury and government knew about and chose not to change the law to limit, restrict or prevent it, so the only conclusion is that they were happy with it happening!

Hi OP. Could one of you get supermarket or delivery work to tide you over?
I hope things work out for you.

Many ltd companies are in industries that have intermittent work at the best of times

Like others have said here, there are many lower-paid freelancers working with councils and media companies who insist on a Ltd status to minimise potential IR35 obligations. These people are not high-flying business consultants, they'd mostly prefer to be sole traders as it's often easier and cheaper - this was forced on them and now they're screwed...

The I told you so's on this and other threads are frankly idiots

These threads always get derailed by people who know naff all about running a business and don't understand that by being enterprising we are contributing to the growth of the economy overall, perhaps employing their friends and relatives, and definitely providing services that they use. I calculated that I pay around £700 more per year including tax and the costs of running a company than I'd pay if I was a sole trader, so I'd be pretty stupid if I was trying to avoid paying tax! I think it's best to not even bother getting into these discussions and support each other.

I'm a LP in the same situation, I've got bits of work ticking over so it's not worth furloughing myself, but I've lost about 80% - I think it will be difficult to get going again once this is over. I was really upset last week, I feel really unvalued, the people I give work to will be covered by other schemes, yet I'm the one who does all the finding work, maintaining relationships, marketing etc. and I get nothing. My fixed costs are probably about £500-700 / month. I've written to my MP but not holding out too much hope.

Like others have said here, there are many lower-paid freelancers working with councils and media companies who insist on a Ltd status to minimise potential IR35 obligations. These people are not high-flying business consultants, they'd mostly prefer to be sole traders as it's often easier and cheaper - this was forced on them and now they're screwed...

Also universities. I have a uni in our city. As a result I have a lot of limited company directors who provide services to the Uni only, such as lecturers, research associates, support services etc. The Uni has been adament for years that they won't accept anyone as a sole trader - they have insisted on all their freelancers/contractors being limited company. So it's not just businesses trying to pull a fast one - it's also non profits like Universities. It was the same with our local hospital - loads of consultants (both medical and non medical) only engaged via their own limited companies. How about the BBC - they loved paying their presenters via limited companies rather than putting the on the payroll. ALL employers, including public sector, charities, etc., have embraced freelancers to avoid the additional costs of employment, such as employers nic, workplace pension, sick pay, redundancy, etc etc. To blame the limited company director is misguided and often false. The entire employment/freelance market is to blame, employers, workers and goverment!

Also universities. I have a uni in our city. As a result I have a lot of limited company directors who provide services to the Uni only, such as lecturers, research associates, support services etc. The Uni has been adament for years that they won't accept anyone as a sole trader - they have insisted on all their freelancers/contractors being limited company. So it's not just businesses trying to pull a fast one - it's also non profits like Universities. It was the same with our local hospital - loads of consultants (both medical and non medical) only engaged via their own limited companies. How about the BBC - they loved paying their presenters via limited companies rather than putting the on the payroll. ALL employers, including public sector, charities, etc., have embraced freelancers to avoid the additional costs of employment, such as employers nic, workplace pension, sick pay, redundancy, etc etc. To blame the limited company director is misguided and often false. The entire employment/freelance market is to blame, employers, workers and goverment!

Our income is not over 50k. Prob about 40 joint max. Even if we could furlough both of us that wouldn't cover our mortgage. We have minimal costs due to the mortgage being a lot due to where we live ( not London.) We still commute about a hour to clients because we moved out to 'afford' a family home. We can only take 3 months mortgage holiday. I cannot see this being over in 3 months ?

What is the situation with universal credit ? Is it based on last years earnings ?

Anyway as many people say it's been essential we've been a limited company for our work, so there is nothing underhand about it, we take advice from an accountant about how to pay ourselves. I personally do not receive dividends only DH. My income is just under 12k a year.

We have kids so one of us will need to stay home with them, but yes we will both try to find some work around that. I'll do anything.

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

So why do it then? Like genuine question, not being snarky. It seems like it bites you on the backside either way.

@gamerchick we've explained repeatedly upthread...

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

There have already been suggestions, more than a few, on another thread that such people should be conscripted to pick fruit and veg as a condition of getting UC or SSP or any assistance. Nothing more than what all other people who're on benefits - disabled, sick, working poor, even some pensioners - have been putting up with for years.

gamer because some people are plumbers, you maybe can't get a full time PAYE job with a company doing plumbing work, so you set up as a limited company instead and answer calls to fix people's radiators or leaking pipes.

When setting up your company and your financial advisor (the expert) tells you that it is a better way to be a limited company than a sole trader why would you not do that?

This is like having a go at someone for taking out an ISA, I mean why not pay tax on your savings? Just put it in the bank, any income earned from the savings account has to be added to your self assessment.

Lots of limited companies pay accountants every month, personal liability insurance (gas engineer might blow up your house) and the accountant works out your corporation tax that you pay. You still pay into the system, you still pay income tax on dividends.

Some contractors enjoy the challenge of working at different places rather than being stuck for years in one company.

I think there is this misconception that they are all earning over £100k and dodging tax which just isn't the case. On the other thread a poster worked out that on £100k a PAYE person would get £3k less per year than a person with a limited company. But weigh that against job security, paid holiday, paid annual leave, pension, maternity pay, parental leave etc.

As a business we pay corporation tax/NI/Employees tax and then tax on dividends. Fuck off outta here comparing us to self employed people who declare the absolute minimum. We pay a shit load of tax and have no support from the government. We paid 19% tax on income, then taxed again on the dividends we do take. Its not a tax dodge or tax avoidance when you are providing a service.

Luckily, I'm paid PAYE so can be furloughed, but we cannot operate for the next three months and so we have lost DH's wage. Luckily we have post tax savings (bye house deposit) to get us through but it really annoys me when people say that we are cheating the system. It's also not the same as entertainers, using limited companies as tax avoidance schemes. It doesn't work like that for most small businesses, due to the changes in the tax system - Honestly, DH would earn more being PAYE, which is something we are debating, making a few people unemployed. But why should we give a shit about others, when no-one cares about us?

FWIW - we had to be a limited company to get certain contracts for our work.

DH also wasn't employed full time because he has health issues which impact his ability to work full time, so we needed the flexibility that working for ourselves would provide. He would still struggle to work full time but part time work is preferable when this all blows over.

I call BS. The unemployed are not currently conscripted. What country are you in?

Did you bother to read my post? I wrote that on another thread there were suggestions 'the unemployed' be compelled to harvest fruit and veg. Suggestions. From posters, on an MN thread, where posters put forth their opinions . 'BS'? American term. What country are you in? I'm in the UK.

So why do it then? Like genuine question, not being snarky. It seems like it bites you on the backside either way.

I don't think you're getting what being director of a limited company means. If I don't work, I don't earn any money. Who is going to pay me when I'm off sick? Who is going to pay for my maternity? Who is paying into my pension?

As I said upthread, sometimes you don't make enough money in a month to cover your expenses so you can't pay yourself a full wage. That's why you pay yourself a lower monthly amount and take dividends when you've made a profit.

Yes there are people who are gaming the system by being high-paid full-time contactors and taking dividends rather than PAYE. But the government is massively clamping down on this at the moment and that's not the situation that OP is in.

No I don't know, that's why I asked.

Thankyou for explaining.

This is about the fifth thread from people who have limited companies where people have come on and accused us all of being tax avoiders despite people explaining patiently again and again that we're not actually benefitting financially. But they just ignore those posts.

I had no idea how pervasive the myth was.

A third of small businesses make less than £10k a year.

I started my business because I couldn't hold down a full time job with a child with SN. My income is less than half what it was when I was employed. I know tens of women who work for themselves for exactly the same reason.

But don't let the truth get in the way of your prejudice.

And 2% of us earn over £150k - exactly the same as the rest of the population.

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

It really isn't.

You pay 19% corporation tax + 7% dividend tax (26%) up to £37.5k and then over £37.5k you pay 19% corporation tax + 32.5% dividend tax (51.5%). One advantage is that you get the first measly £2k of dividends tax free.

This compares to employees who pay 20% up to £50k and 40% over £50k.

So the % tax paid is higher.

Plus you don't get paid leave, maternity, sick pay, pension contributions.

It used to be the case years and years ago that it was tax efficient and that has stuck in people's minds but it really isn't anymore.

Oh and top of paying more tax and having zero benefits we also pay a minimum of about £1-1.5k accountancy fees and most of us will have to pay for public liability insurance and other insurances too.

So all of those that think we pay less tax so it's fair game to be total dicks about many of us facing bankruptcy can fuck right off.

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

I don't know how you think this works

If we're not working there is no dividend.

The dividend doesn't magically appear, like salary it only exists if we are working.