Summer Budget - self employed [sad]

[venusandmars]

Having run a ltd company for 12 years and paid through the combination of salary and dividends, I'm now wondering whether it is going to be simpler to wind up the company and be self-employed......

Talkinpeace I'll be very interested to see what you think of this. It looks like a big hit.

www.accountingweb.co.uk/press/summer-budget-2015-mixed-bag-small-businesses

I was wondering much the same thing... Clever finance people, please can you explain the impact? Not sure I completely understand it.

I am in the same position and wondering whether it worth continuing with the hassle of having a ltd company.

I have emailed my accountant and had a fobbed off response so really not sure about it all.

I currently pay small salary + dividends (under the higher rate threshold), so am I right in thinking that these dividends are now taxed when they previously weren't?

I'm not an accountant but I think it's important to remember (I am fairly sure this is correct) dividends are paid on profit. Ie. on money for which capital gains tax has already been paid. It might well be preferable then to be a sole trader.

However what is not at all clear is what to do with a limited company with 2-3 directors.

This is worth a read whichreport

Ok, did a quick calculation for a client this morning. It is still worth being a ltd company in most cases as long as you can keep your earnings under Higher rate threshold.

There are however lots of knock on effects rather than just the dividends being taxed.
It is a mixed bag indeed. For one thing employer's allowance will no longer be claimable by one person companies so may be worth getting another employee etc.

A lot of us accountants have only done an initial review and by fully got our heads round the detail as yet. The detail is not fully available in many areas.

Out of interest, I am surprised to see an accountingweb link outside accountancy circles. Where did you find it?

Talking of detail - note that the gov budget report is 123 pages long. It will take your accountant some time to digest all of that. What we don't want to do is give out information until we are as sure as we can about it.

The new dividend taxation seems to mean that more personalised calculations are needed to decide what's the best for each company. For companies with more than one employee where the director-shareholder doesn't need to pay NI on salary it may well be that salary will be more tax efficient overall. But it'll also depend on other income, company profits and whether there's a plan to cease trading or sell the company soon and withdraw the profits that way.
More work for accountants I suppose :)

Exactly riksti