Managing expenses efficiently

[fatJock]

I’ll cross my fingers that you last the two years to need to worry about it

Argue? Meh. Sensitive lad you are it seems.

[youngguy]

I’ll cross my fingers that you last the two years to need to worry about it

Argue? Meh. Sensitive lad you are it seems.

Not sensitive at all! If you take enjoyment I'm happy to have given you some material. I just don't have any interest in keyboard wars. I come here to learn,not to fill my ego (see any of my previous posts).

I absolutely anticipated the classic approach of ppl not answering the Q and resorting to the age-old "as you asked a Q that obviously means you won't last more than a few months in a contract". That's kind of how most threads end here which is what I alluded to in my first post.

So I appreciate your 'answers' but they are not relevant to my Q at all....I will take your crossed for gets though, you can never have too much good luck [emoji6]

[SeededLoaf]

When this happened to me I just swallowed it and paid the expenses personally. The money that was then left in the business account built up my warchest and some went into pension.

Its definitely not worth getting bothered about for the sake of a couple a k and if you make it over 2 years then you'd have done well out it.

[northernladuk]

3 pages and no closer to an answer. Time to ask the accountant I think

[youngguy]

3 pages and no closer to an answer. Time to ask the accountant I think

Agreed! A bit surprised but...... the ppl have spoken!

[WordIsBond]

If the question were difficult I'd understand not getting an answer. I'll explain how to go about it so you will all be smarter next time.

Higher rate tax on dividends is 32.5%. So if this is paid as dividends the following applies.

Watch carefully, children and youngguys. I'll do this on a per 100 basis.

X is the amount of dividend our friend must receive to clear £100. X * 0.325 is the tax he must pay on any dividends he must receive. Basic maths tells us, then:

X - X * (0.325) = £100
or
X * (1-0.325) = £100 (if you aren't still with me, you aren't fit to run a Ltd so go permie or umbrella)
or
X * 0.675 = £100
or
X = £100 / 0.675
or
X = £148.15

For £500, that's £740 extra dividends a month.

If our young friend is able to absorb this below the higher rate threshold, his per £100 required dividend is £108.11 (using the above formula but with 0.925 to reflect the 7.5% dividend tax). For £500, that would be £540 in extra dividends a month. If it's going to be partly below and partly above, do a pro-rata calc between £540 and £740 and you have your answer.

How much extra revenue would Young Whippersnapper Ltd need to generate to provide these dividends? We'll use the £740 / month. Corporate tax rate is 19%.

Using the exact same logic as above to derive a final formula, and using 19% instead of 32.5% for the tax rate, YW Ltd needs £740 / 0.81, or £914 / month. If the sole fee earner from YW Ltd, Mr YG, works 18 days a month, he will need to generate fees of an extra £50 / day to generate that kind of revenue. If he keeps this in basic rate territory, he will need an extra £37 / day.

[kaiser78]

If the question were difficult I'd understand not getting an answer. I'll explain how to go about it so you will all be smarter next time.

Higher rate tax on dividends is 32.5%. So if this is paid as dividends the following applies.

Watch carefully, children and youngguys. I'll do this on a per 100 basis.

X is the amount of dividend our friend must receive to clear £100. X * 0.325 is the tax he must pay on any dividends he must receive. Basic maths tells us, then:

X - X * (0.325) = £100
or
X * (1-0.325) = £100 (if you aren't still with me, you aren't fit to run a Ltd so go permie or umbrella)
or
X * 0.675 = £100
or
X = £100 / 0.675
or
X = £148.15

For £500, that's £740 extra dividends a month.

If our young friend is able to absorb this below the higher rate threshold, his per £100 required dividend is £108.11 (using the above formula but with 0.925 to reflect the 7.5% dividend tax). For £500, that would be £540 in extra dividends a month. If it's going to be partly below and partly above, do a pro-rata calc between £540 and £740 and you have your answer.

How much extra revenue would Young Whippersnapper Ltd need to generate to provide these dividends? We'll use the £740 / month. Corporate tax rate is 19%.

Using the exact same logic as above to derive a final formula, and using 19% instead of 32.5% for the tax rate, YW Ltd needs £740 / 0.81, or £914 / month. If the sole fee earner from YW Ltd, Mr YG, works 18 days a month, he will need to generate fees of an extra £50 / day to generate that kind of revenue. If he keeps this in basic rate territory, he will need an extra £37 / day.

Exactly this. Just ask for a rate rise or take the hit and work your contract through.

[WordIsBond]

This was a test to see if anyone would pick up the logical flaw in my above analysis. Mathematically, it's correct, but the last paragraph leaves out a key component.

If you missed it, go permie or umbrella!

[northernladuk]

This was a test to see if anyone would pick up the logical flaw in my above analysis. Mathematically, it's correct, but the last paragraph leaves out a key component.

If you missed it, go permie or umbrella!

I was just waiting to see if you'd spot your mistake and correct it later.. Honest.

[LondonManc]

I was staying away from home and managed to get a day's wfh - dropped me from 4 to 3 nights per week in a hotel.
In your situation, sounds like that's not relevant with much lower base costs.