Choices for non-dodgers.

[expat]

Can I rerun the brolly question please, for those of us who don't subscribe to what seem to some of the givens for most?

1. I do not pay dividends from my Ltd Co. The profit in the company does not come from the capital nominally invested in it, but from my labour. It is therefore wrong to pay dividends on that capital.

Yes, I know that I only have to be a Ltd Co because the Revenue forced me into it, and on top of that NICs are a mess, and they can't decide on a sensible way to treat people like us, so it's their own fault if people use their rules... I just don't want to because I believe it's wrong.

2. I don't attempt to transfer income to my partner just because she doesn't fall into 40% tax. See no. 1: she didn't earn it, I did, so it is mine to pay tax on.

3. I'm coming to think that I'll probably see out my career without any more training courses that I'll have to pay for myself. So most of my legitimate expenses will be the same as any employee would have (travel and subsistence).

Given these points, is it worth running a Ltd Co rather than using a respectable umbrella?

[Ardesco]

Yes because you aren't paying them fees.

That being said, it is not wrong to use the rules they have given us, do you really think that IR would not tax you for every penny possible just because they thought it wasn't fair ?

[oraclesmith]

Do you consider yourself outside IR35 ? If so, then do you need to take all your income out of your company ? What I'm getting at is that with a limited, you have the flexibility of retaining income within the company, not as a tax dodge but in order to build up a fund for some future venture or to provide income in lean years (levelling) or in order to gain access to business investment opportunities. You could still proper pay tax on it (CT or income tax/NI), as and when required.

[expat]

Do you consider yourself outside IR35 ? If so, then do you need to take all your income out of your company ? What I'm getting at is that with a limited, you have the flexibility of retaining income within the company, not as a tax dodge but in order to build up a fund for some future venture or to provide income in lean years (levelling) or in order to gain access to business investment opportunities. You could still proper pay tax on it (CT or income tax/NI), as and when required.

Good point. But no, I have no ventures or investments in mind: I don't want to run a business (I'm not a permie because I don't want to be an employee either). And wouldn't income levelling be better done by personal savings?

[MrsGoof]

You still get the 5% "allowance", for you to spend on accountants, bank fees, toys....
What you dont spend can be paid as a divi,

also if you're VAT registered then the flat rate scheme brings in a few extra quid that can be paid as a divi.

so ltd give:
the advantage of lower fees (cheaper than a brollie)
some divis available from money left over from 5%
some divis VAT money retained from flat rate scheme
tax free toys (laptop etc...) - cus you need a machine to do your accounts on

[oraclesmith]

Good point. But no, I have no ventures or investments in mind: I don't want to run a business (I'm not a permie because I don't want to be an employee either). And wouldn't income levelling be better done by personal savings?

The levelling question depends on what you do, how much you earn and whether it would be feasible to take a break from it for a while.

For example, say you're on £80k a year gross. If you work 5 years solid and didn't really need all that money for personal expenditure, your company could pay you a taxable salary of, say £40k a year. You pay 40% tax on the top little bit, but it won't be much, and corporation tax on the other £40k less some expenses. This means over 5 years you would have, say £150k in the company high interest account or stocks etc. This is gaining perhaps more interest than if you paid it to yourself as salary and then into personal savings because (a) it is company money and attracts only corporation tax, so there is minimal degradation of the capital amount and (b) the interest is paid and compounded on the company side (no higher rate tax).

Granted, this means you need to find a good interest bearing business account, but unlike ISA's there are no practical limits on the funds invested like this. Say you build up £175k in the company. Assuming you go to the extreme and get in almost no work for a while, this will pay you about £30k a year in salary for at least 5 years and you've pretty much already paid the tax. Plus the reducing balance will continue to gain compound interest. You need to watch your ISA's though as these will usually be better investments. In my opinion.

[expat]

You still get the 5% "allowance", for you to spend on accountants, bank fees, toys....
What you dont spend can be paid as a divi,

also if you're VAT registered then the flat rate scheme brings in a few extra quid that can be paid as a divi.

so ltd give:
the advantage of lower fees (cheaper than a brollie)
some divis available from money left over from 5%
some divis VAT money retained from flat rate scheme
tax free toys (laptop etc...) - cus you need a machine to do your accounts on

OK, lower fees I suppose, balanced by more paperwork to do.
No divis, that was my point.
What do you mean by "money left over from 5%"?
Flat rate scheme, good point: if HMRC reckon it's good for me and good for them, I have no opoosition to that.

[ASB]

Given these points, is it worth running a Ltd Co rather than using a respectable umbrella?

Depends on you attitude to pensions. Better regime generally if your co.

I must admit to being slightly curious as to why you feel the apparent need to pay tha maximum possible to the IR. Still if that's what floats your boat....

BTW, the IR do actually accept donations. Some people give them...

[boredsenseless]

Can I rerun the brolly question please, for those of us who don't subscribe to what seem to some of the givens for most?

1. I do not pay dividends from my Ltd Co. The profit in the company does not come from the capital nominally invested in it, but from my labour. It is therefore wrong to pay dividends on that capital.

Yes, I know that I only have to be a Ltd Co because the Revenue forced me into it, and on top of that NICs are a mess, and they can't decide on a sensible way to treat people like us, so it's their own fault if people use their rules... I just don't want to because I believe it's wrong.

2. I don't attempt to transfer income to my partner just because she doesn't fall into 40% tax. See no. 1: she didn't earn it, I did, so it is mine to pay tax on.

3. I'm coming to think that I'll probably see out my career without any more training courses that I'll have to pay for myself. So most of my legitimate expenses will be the same as any employee would have (travel and subsistence).

Given these points, is it worth running a Ltd Co rather than using a respectable umbrella?

Whilst I don't see the need to pay any more tax than I need to it is refreshing to see a post on this sunject that for once isn't about how much can I scam withour getting caught or is it possible to claim £400 for my mcdonalds just cos an 18yr old said I could at an umbrella company.

Good on you for being principled, overly so (for me anyway) but principled none the less.

And the answer to your question is : Yes run a limited because ultimately the reason I got out of permiedom was to stop annoying little runts chasing me for pointless paperwork all the time, and that is the key skill of every umbrella executive.

Anyone else noticed they are called account executives, yet I don't see the 4 bed house, BMW, stock options and huge salary that usually goes along with the title executive

[TheMonkey]

My god, OTHER people with principles and logic!

Money isn't everything!