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    Lightbulb Moving from Limited to Umbrella (Tax/Dividends Question)

    Hi all,

    I'm coming up to the end of a year trading as a limited company and I must admit it's been a steep learning curve and quite a few headaches sorting things out (I won't blame my accountants ).

    I was considering closing down my company and moving to an umbrella company. Obviously I want to do this in the most 'efficient' way possible, so what I was thinking was:

    After April 5th 2013, take up to the maximum allowed for a dividend (I don't think I have that much in my business), then apply to close the company down (in order to efficiently get whatever might be left out etc.)... After this if I move to an umbrella, how would my tax etc. be effected by taking that dividend? Would I have to let HMRC know I'm not doing self assessment now? Do I still have to do self assessment?

    I guess the biggest problem I had with Limited was that I didn't really know how much I could get out half the time (and that I couldn't accumulate enough to hire more people :P). So I'd like to be able to see if it would work out taking the money as a dividend then the umbrella sorting my PAYE each month - would I be on the higher rate instantly?

    Thanks to anyone who has the time to reply, and manages to understand my ramblings.

    Cheers
    Pete

  2. #2

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    Quote Originally Posted by peteski22 View Post
    Hi all,

    I'm coming up to the end of a year trading as a limited company and I must admit it's been a steep learning curve and quite a few headaches sorting things out (I won't blame my accountants ).

    I was considering closing down my company and moving to an umbrella company. Obviously I want to do this in the most 'efficient' way possible, so what I was thinking was:

    After April 5th 2013, take up to the maximum allowed for a dividend (I don't think I have that much in my business), then apply to close the company down (in order to efficiently get whatever might be left out etc.)... After this if I move to an umbrella, how would my tax etc. be effected by taking that dividend? Would I have to let HMRC know I'm not doing self assessment now? Do I still have to do self assessment?

    I guess the biggest problem I had with Limited was that I didn't really know how much I could get out half the time (and that I couldn't accumulate enough to hire more people :P). So I'd like to be able to see if it would work out taking the money as a dividend then the umbrella sorting my PAYE each month - would I be on the higher rate instantly?

    Thanks to anyone who has the time to reply, and manages to understand my ramblings.

    Cheers
    Pete
    I think your main problem was that you didn't have a very good accountant; if you decide to stay Ltd I would suggest you get in touch with one of the specialist contractor accountancy firms. I am confused by your comment 'taking the money out as a dividend then the umbrella sorting my PAYE each month' - what do you mean exactly?
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    I think your either confused or a sockie you don't get dividends when you use an umbrella, you become an employee of the umbrella so you just get normal PAYE same as any other employee

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    Quote Originally Posted by Support Monkey View Post
    I think your either confused or a sockie you don't get dividends when you use an umbrella, you become an employee of the umbrella so you just get normal PAYE same as any other employee
    The fact he thinks this is probably down to poor research or effort in understanding his situation so a brollie is most definately the best bet.
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    Quote Originally Posted by Support Monkey View Post
    I think your either confused or a sockie you don't get dividends when you use an umbrella, you become an employee of the umbrella so you just get normal PAYE same as any other employee
    I think he's saying take divs from his existing Ltd, then close it down and THEN move to brolly for full PAYE. Meaning next Self Assessment would be for 100% PAYE plus what ever divs they managed to take out of current Ltd.

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    Default Moving from Limited to Umbrella (Tax/Dividends Question)

    Have you paid any/accrued for corporation tax?

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    Quote Originally Posted by Support Monkey View Post
    I think your either confused or a sockie you don't get dividends when you use an umbrella, you become an employee of the umbrella so you just get normal PAYE same as any other employee
    No, I'm aware that you can't get dividends as an employee under an umbrella, I meant.. take the dividend payment from my limited company > 5th April (start of the new tax year) and then afterwards, after starting to close down my company, move to an umbrella and get paid (PAYE) as per Joe Blogs.. I wanted to know if/what kind of impact that would have on my personal tax liability etc.

    Thanks for the replies.

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    Quote Originally Posted by northernladuk View Post
    The fact he thinks this is probably down to poor research or effort in understanding his situation so a brollie is most definately the best bet.
    Hopefully I cleared this up with the reply above, if not.. Just let me know and I'll have another go

    Cheers

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    Quote Originally Posted by stek View Post
    Have you paid any/accrued for corporation tax?
    I will have corporation tax to pay as part of closing my company down/company year end I suspect, I've already set aside money for all company related taxes though.

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    Make absolutely sure the bank account is empty before you close the company. Once you have closed the company you will not be able to use your LTD bank account again. Any money will go to the crown and you will have a very protracted process to re-open should you have made a mistake.
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