Reply to: LTD calculator

[Fred Bloggs]

I asked my accountant whether I was limited to £10k (e.g. matching my salary) in company pension contributions and they referred to the word "reasonable". Vague indeed. Does that mean they won't care if you pay £12 or 15k into a pension, but will if its £30 or 40k - or does it have to be 80k+ before they sit up and take notice? Ridiculous.

I agree. But this is the world we now live in. What I would do if I were you, is this. If you seriously want to punt 30 or 40k into a SIPP then ask advice from an IFA. I think that providing you've taken advice then you'd be pretty bullet proof. Could be worth paying for an hour or two of somebody's time for that amount of money being invested? My SIPP is with HL and I do find their customer services are very good compared to many other companys.

[GreenerGrass]

An IFA posted the details of a case that was supposed to settle that point in favour of larger "reasonable" contributions over on another website (Shout99). I think that debate is largely settled now for most cases.

I asked my accountant whether I was limited to £10k (e.g. matching my salary) in company pension contributions and they referred to the word "reasonable". Vague indeed. Does that mean they won't care if you pay £12 or 15k into a pension, but will if its £30 or 40k - or does it have to be 80k+ before they sit up and take notice? Ridiculous.

[Crossroads]

I thought it was up to £1m in your lifetime, not a once only deal.

I've got some way to go before the £1m limit kicks in.

Correct. Lifetime £1m limit for all CGT related disposals.

[VectraMan]

AFAIK, FWIW and IANAA, but the new tax legislation means that you'll only get the entrepreneur's relief once in your lifetime I believe. Not sure whether you'd be able to see the missus your shares before closing to make that twice effectively, but its still limited.

I thought it was up to £1m in your lifetime, not a once only deal.

I've got some way to go before the £1m limit kicks in.

[Fred Bloggs]

I'm thinking of SIPPing anything over the 40% band to clear out my bank account at the end of this year. There is still debate on if you can only pay up to your 10K salary into the SIPP, anything more is at the discretion of your local tax inspector ( or words to that effect ).

An IFA posted the details of a case that was supposed to settle that point in favour of larger "reasonable" contributions over on another website (Shout99). I think that debate is largely settled now for most cases.

[rootsnall]

I believe you are right. I always felt pretty uncomfortable with the idea of being a serial business closer downer over the long term. But SJD defend it as far as I know, saying they never had a problem. It's academic now anyway since the changes in CGT taxation. I will have to work out how much I retain per year after taxes but I do not think it is anywhere near to 73%. I pay £10k salary and draw out divis to just under the 40% band. Anything left over goes into a SIPP.

I'm thinking of SIPPing anything over the 40% band to clear out my bank account at the end of this year. There is still debate on if you can only pay up to your 10K salary into the SIPP, anything more is at the discretion of your local tax inspector ( or words to that effect ).

[Fred Bloggs]

AFAIK, FWIW and IANAA, but the new tax legislation means that you'll only get the entrepreneur's relief once in your lifetime I believe. Not sure whether you'd be able to see the missus your shares before closing to make that twice effectively, but its still limited.

You still lose the very valuable taper relief.

[LisaContractorUmbrella]

Yup as stated above by Vectraman

I know - I just wanted to labour the point - for obvious reasons

[Ruprect]

I believe you are right. I always felt pretty uncomfortable with the idea of being a serial business closer downer over the long term. But SJD defend it as far as I know, saying they never had a problem. It's academic now anyway since the changes in CGT taxation. I will have to work out how much I retain per year after taxes but I do not think it is anywhere near to 73%. I pay £10k salary and draw out divis to just under the 40% band. Anything left over goes into a SIPP.

AFAIK, FWIW and IANAA, but the new tax legislation means that you'll only get the entrepreneur's relief once in your lifetime I believe. Not sure whether you'd be able to see the missus your shares before closing to make that twice effectively, but its still limited.

[Ardesco]

But only if you fall outside IR35 - inside and you pay tax, employee's and employer's NI as you do with a brolly

Yup as stated above by Vectraman

[LisaContractorUmbrella]

With umbrella you are paying Employers and Employees NI and Tax on all of your income, with a LTD Co you can pay yourself your tax free allowance, then pay CT and then take your money out as divi's which saves you a lot of tax.

But only if you fall outside IR35 - inside and you pay tax, employee's and employer's NI as you do with a brolly

[Ardesco]

Well let me give you some numbers.

350pd

it basically gives 77.68% take home, which fits in with what you said basically.

and if i use contractor umbrellas calculator it gives 59.91% (with no expenses)

is the difference in tax between ltd and umbrella really that vast???

just a bit shocked anyone would umbrella with those kinda charges!

With umbrella you are paying Employers and Employees NI and Tax on all of your income, with a LTD Co you can pay yourself your tax free allowance, then pay CT and then take your money out as divi's which saves you a lot of tax.

[VectraMan]

is the difference in tax between ltd and umbrella really that vast???

Yes.

Though that assumes you're outside IR35. If you're caught by IR35, there's not much benefit over an umbrella.

Has it ever been confirmed what's going to happen post budget with this scheme? The 10% is for selling up, do we know if it'll apply to shutting down the business too?

[Fred Bloggs]

I'm pretty sure this calculates on the basis of leaving the money in the company, then shutting down and getting the taper relief (or whatever it's going to be called) after three years.

If you put in £10,000 per day, you still get to keep 73%.

I believe you are right. I always felt pretty uncomfortable with the idea of being a serial business closer downer over the long term. But SJD defend it as far as I know, saying they never had a problem. It's academic now anyway since the changes in CGT taxation. I will have to work out how much I retain per year after taxes but I do not think it is anywhere near to 73%. I pay £10k salary and draw out divis to just under the 40% band. Anything left over goes into a SIPP.

[Mehmeh]

Well let me give you some numbers.

350pd

it basically gives 77.68% take home, which fits in with what you said basically.

and if i use contractor umbrellas calculator it gives 59.91% (with no expenses)

is the difference in tax between ltd and umbrella really that vast???

just a bit shocked anyone would umbrella with those kinda charges!