Decisions About Ltd company

[Jazerbell]

Hello I am new here and also new to the world of contracting so please bear with me. I have just aquired a new contract role with a company working full time. I did originally plan to invoice this company through company I help run with my dad. But the more I look into the tax side of things I am wondering if I should start my own ltd company so that I can pay myself dividends instead of the commission I was planning to pay my self from my dads company after minimum wage and expenses have been paid. I just wondered if there were any other costs I should consider first or if I can still pay myself the dividend through my dads company? Sorry if this confusing.
Thanks

[Clare@InTouch]

You can only be paid dividends if you're a shareholder - is this the case in your Dad's company? By commission do you mean wages, with tax and NI deducted?

Your own limited company could be tax efficient, it depends on income. If your turnover will be over £30,000 and you're contracting for more than a year then it's worth considering, although I'd suggest you read up on IR35 first just to make sure you know the effect it could have. If you're under these limits then look toward umbrella companies too, or the option of being self employed.

If you have lots of questions and don't know where to start, read the guides to the right of this screen, and give a few accountants a call. Generally they'll be happy to have a chat to you and explain anything and everything you don't understand

[JamJarST]

Just a quick question, who is the contract between? You and the Clint/Agent, your dad's company and and client/agent, or your company and client/agent? You will need to change the contract if you want to change the relationships.

[prozak]

Hello I am new here and also new to the world of contracting so please bear with me. I have just aquired a new contract role with a company working full time. I did originally plan to invoice this company through company I help run with my dad. But the more I look into the tax side of things I am wondering if I should start my own ltd company so that I can pay myself dividends instead of the commission I was planning to pay my self from my dads company after minimum wage and expenses have been paid. I just wondered if there were any other costs I should consider first or if I can still pay myself the dividend through my dads company? Sorry if this confusing.
Thanks

In 95% of cases the most efficient structure is

Basic salary (up to the NI Secondary threshold) + dividends.

That is of course your revenue puts you over 30k as suggested by clare.

If I were you I'd call clare - or for partiality one of the other accountants on these board - they specialise in this area.

If you want a breakdown of a load of permutations - www.taxcafe.co.uk - "Salary V Dividends" is a good book.

[Jazerbell]

Thank you for your comments. I do expect my earnings to be around 40K+ pa and for the contract to last at least a year maybe more. I had another thought about NI, would I have to pay employee and employers national insurance? I am a 20% share holder in my dads business so I am a part owner but I can't find any good information about the amount of NI I have to pay. Does anyone have any advise on this please?

[pmeswani]

Thank you for your comments. I do expect my earnings to be around 40K+ pa and for the contract to last at least a year maybe more. I had another thought about NI, would I have to pay employee and employers national insurance? I am a 20% share holder in my dads business so I am a part owner but I can't find any good information about the amount of NI I have to pay. Does anyone have any advise on this please?

Regarding NI and Income Tax contributions, it is down to personal circumstances, as it depends on your total income as well as your salary / dividends. So, you should speak to your Accountant about this.

[Clare@InTouch]

Thank you for your comments. I do expect my earnings to be around 40K+ pa and for the contract to last at least a year maybe more. I had another thought about NI, would I have to pay employee and employers national insurance? I am a 20% share holder in my dads business so I am a part owner but I can't find any good information about the amount of NI I have to pay. Does anyone have any advise on this please?

Ni is payable on salary, so it depends what wage you take.

If you're taking dividends then the tax due will be determined by your overall level of income. If you keep to salary of £7,068 then you could take dividends of £31,866 before any tax kicked in, assuming no other income and a normal tax code.