PAYE vs Limited Company

[Jase]

I'd like make sure I understand all the ins and outs of a Limited Company by comparing against PAYE. The following spreadsheet shows my calculations:

http://db.tt/66seRjoH

Assumptions:

• 747L tax code
• £100k (ex VAT) invoiced annually
• Annual salary of £12k drawn from company
• All remaining profit is taken as dividends

Can anyone pick any holes in the above?

Jase.

[Craig@Clarity]

Hi Jase,

PAYE scenario:

1. The net wage is going to be about £8k less than you've stated because under and umbrella company (assuming that's what you mean when you say PAYE), employer's NIC needs to come off the take home too.

Ltd Co scenario:
1. The flat rate VAT is calculated on your gross turnover not NET.
2. Consider the 1% discount to the FRS percentage in the first year of VAT registration.

Also, consider the IR35 scenario under a limited company too in your income comparison,

Hope this helps

[malvolio]

I'd like make sure I understand all the ins and outs of a Limited Company by comparing against PAYE. The following spreadsheet shows my calculations:

http://db.tt/66seRjoH



Assumptions:

• 747L tax code
• £100k (ex VAT) invoiced annually
• Annual salary of £12k drawn from company
• All remaining profit is taken as dividends

Can anyone pick any holes in the above?

Jase.

Not really, but it's not about the money. It's about not having a boss and a Human Remains department, Its also about not being guaranteed to earn £100k a year - some years it will be much less. You've also missed out a pile of invisible employee benefits like SSP and training .

You will earn more if you can keep working unless you do something really stupid, but trying to quantify how much against permiedon is comparing apples and elephants.

[Jase]

1. The flat rate VAT is calculated on your gross turnover not NET.

Excellent, thanks, have changed the formula! I am aware of the 1% saving in the first year but am looking longer term.

Not really, but it's not about the money. It's about not having a boss and a Human Remains department, Its also about not being guaranteed to earn £100k a year - some years it will be much less.

Agree 100%, this is not the only comparison I have completed, but is one I needed a review of. (And of course money is the reason I get up and go to work each day). £100k is a benchmark but I expect it to be a lot less given my love of travel.

I love being my own boss and never having to complete another performance review

Jase.