financial advantage of ltd vs paye

[laney]

I've searched through earlier posts but can't find anything about this.

Is this correct....
If you have your own ltd co, pay yourself min wage and then rest as dividends then you will pay 20% corporation tax on profits before issuing dividends and will pay a further 20% on dividends that take you into higher tax bracket.

If you are PAYE then you pay 20ish% on lower rate income and 40% tax on anything that takes you into higher rate band.

So is the only cash advantage of having ltd co that you aren't paying as much NI (none on dividend payments) & can claim more against expenses (travel, home office etc)? That can't be right can it - is Gordon Brown really making this much effort just to collect some more NI?

[Kyajae]

I've searched through earlier posts but can't find anything about this.

Is this correct....
If you have your own ltd co, pay yourself min wage and then rest as dividends then you will pay 20% corporation tax on profits before issuing dividends and will pay a further 20% on dividends that take you into higher tax bracket.

If you are PAYE then you pay 20ish% on lower rate income and 40% tax on anything that takes you into higher rate band.

So is the only cash advantage of having ltd co that you aren't paying as much NI (none on dividend payments) & can claim more against expenses (travel, home office etc)? That can't be right can it - is Gordon Brown really making this much effort just to collect some more NI?

Basically, yes. The only thing you've missed, is that if, over the financial year, you pay yourself a salary that's more than your tax-free personal allowance, not only will you incur tax and NI deductions on that salary, but your ltd co will have to pay employers NI on that salary which I think at the mo is 11%

[ASB]

I've searched through earlier posts but can't find anything about this.

Is this correct....
If you have your own ltd co, pay yourself min wage and then rest as dividends then you will pay 20% corporation tax on profits before issuing dividends and will pay a further 20% on dividends that take you into higher tax bracket.

If you are PAYE then you pay 20ish% on lower rate income and 40% tax on anything that takes you into higher rate band.

So is the only cash advantage of having ltd co that you aren't paying as much NI (none on dividend payments) & can claim more against expenses (travel, home office etc)? That can't be right can it - is Gordon Brown really making this much effort just to collect some more NI?

If effect pretty much, but semantically no.

Your company pays 19% CT on profits.

you pay additional income tax (25% of the net) once in the higher rate band > 38 ish K including the notitonal tax credit.

If you work out the NI you might understand Godons view. The sums involved can be large.

[THEPUMA]

The savings are potentially huge:-

1 - 23.8% NI saving on the first £30K ish, 12.8% saving on the remainder
2 - The potential ability to use your spouse's allowances (subject to the Arctic case, which the taxpayer is currently "winning"
3 - The ability to defer, absolutely save tax by restricting your drawings and subsequently drawing as a capital sum
4 - The ability to offset expenses against your income.

Those are the main ones and there are many more minor ones.

Puma

[Tinker]

yes - due to being a wuss and knowing my contract wouldn't stand up to IR35 review I'm moving from MSC (where I received dividend payments, a la Ltd company) to umbrella and I reckon I'm going to lose at least £1000 - £1500 a month in take home pay... bummer (am re-negotiating my contract as we speak !)

[laney]

thanks for all the info...guess it's worth me going ltd then!