Reply to: How Much In Your Pocket

[tim123]

'Cos it's easier to ask and wait for a bored sucker to do the sums perhaps ?

I meant "why isn't he working with the funds in his company this way"?

He said initially that he couldn't achieve the same return with his Ltd.

As this method is the 'normal' one for company director with non-working partner, and Tony is likely to know this, there must be some reason why he can't achieve it with his limited, that will also stop him achieving it with the composite solution.

tim

[BoredBloke]

Thanks, That is exactly what I was looking for. The figures roughly match those I had in my rough calculations. I will be seeing my accountant this week with a view to getting the figures increased. Thanks.

[Darren@UptonAccountants]

Accountants

thanks for all the help.

tried to phone darren today, seems to be out.

any other suggestions? would like to have a few possibilities.

also...with all the publicity darren gets here, you would think we would be swamped with new clients!

Hi Scott, had to disappear to Edinburgh on Friday afternoon....will be in most of Monday or drop me a quick email and I'll call you back if you'd prefer?

[ASB]

Thanks for the detailed reply. So does anybody have any recommendations as to the amounts to draw out of my company based on these figures? I want enough to live on per month (just) and as much as poss in quarterly dividends. The amount my accountant (1k per month and 5k per qtr) were not really enough to live on. Also I don't want to have too low a PAYE income so that I appear on the IR radar.

As malvolio says only you know what you need. But the parameters are minimum of nil, maximum of about 9k per quarter in divis [plus the 1k salary]. Personally I wouldn't plan on retaining less than about 8k in year 1. This gives a sensible max of about 30k divis - or about 40k if you are no longer incurring the expenses.

Of course this means you have much greater flexibility by year 2, since you have what you retained from year 1 as a "float"..

[malvolio]

£1k and £5k per quarter is quite enough to live on. Stop spending so much...

Come on, it's your money, it's your company, it's your weekly shopping bills (Or whatever). If you can't manage that simple equation, why are you pretending to be a freelance? Get a permie job and stop worrying, or get an accountant that knows what they're talking about.

And to go back to the original question, the comp can't do anything a LtdCo can't do, the only real differences are the gap between the comp's fees and your accountant's and the minor detail that people who use comp's are under serious (and backdated!) threat.

[BoredBloke]

Thanks for the detailed reply. So does anybody have any recommendations as to the amounts to draw out of my company based on these figures? I want enough to live on per month (just) and as much as poss in quarterly dividends. The amount my accountant (1k per month and 5k per qtr) were not really enough to live on. Also I don't want to have too low a PAYE income so that I appear on the IR radar.

[ASB]

My accountant is somewhat useless and so I wanted a rough estimate as to how much is a reasonable amount to draw out.

I think you are looking at it from the wrong direction a bit. To use your figures (and I've approximated these for my ease):-

Turnover: 72,000
Salary: 12,000
Er's NI approx : 1,400
Expenses: 9,600

Profit before tax: 49,000

CT: 9,300 [Actually a shade less due to 0 on 10k + 22.5% 10-50k]

Post Tax Profit: 39,700

Dividend: 20,000

Retained profit (transfer to capital account): 19,700

If you have no other income then no further tax is due. Also the company is now holding distributable reserves of 19,700.

So in year 2 you could make no profit and still pay this as a dividend with no further tax to pay (apart from the vagaries of the NCDR which I won't go into).

So where did the balance go? Nowhere. The company still has it.

You could given those number take a dividend of approx 40k, but remember that'll push you into higher rate so you will have some tax to pay (about 2k)

If you no longer had the exes then the profit would rise from 49k to 58,400. The company tax would rise by 9.600 * 19% (1,924). The retained profit would thus increase by 7,776. (i.e. the total dividend you could declare would be in the order of 47,500.)

Remember that whether you pay out the profits or not makes no difference to the CT the company pays, only affects the reserves (save for the NCDR which could cause an increase in the CT you pay in later years if the profit that year is < 50k).

e & oe of course I've only done it in my head.

[scottbell]

thanks

thanks for all the help.

tried to phone darren today, seems to be out.

any other suggestions? would like to have a few possibilities.

also...with all the publicity darren gets here, you would think we would be swamped with new clients!

[BoredBloke]

Cheers for the link I will check it out.

[Hex]

My accountant is somewhat useless

Therein lies the problem. Try below for a calculator. Click on the gross salary after doing the calculation to get a detailed breakdown.

http://calculator.contractoruk.com/ir35-calc.php

[BoredBloke]

I know, I wanted to check that my simple sums were right. When speaking to my accountant he advises that I take £1000 per month salary and £5000 per qtr as divis. My simple maths makes that £12000 + £20000 = £32000 after tax. The turnover is say £1500 * 48 weeks = £72000 before tax. What happens to the remaining £40000. I know that tax has to be paid but not that much. In addition to this I also used to pull £800 per month in expenses (while working down south). Even accounting for that, that only makes my £32k into £41,600

My accountant is somewhat useless and so I wanted a rough estimate as to how much is a reasonable amount to draw out.

[ASB]

The thing is that there's nothing here that Tony can't do for himself.

So why isn't he?

tim

'Cos it's easier to ask and wait for a bored sucker to do the sums perhaps ?

[tim123]

The thing is that there's nothing here that Tony can't do for himself.

So why isn't he?

tim

[ASB]

Lets say billing 75k p.a. Nil expenses. Salary 4800. NI nil, tax nil.

Profit = 70,200. CT = 13338.

Divi = 56862

P1 = 33231. Higher rate tax = 0
P2 = 28431. ditto

Total yield = 82%

Of course this assumes outside IR35 and S660 and that there is no other income on either party to push them into the higher rate bracket.

[BoredBloke]

No, They stated that they pay min wage. Then they pay divis and these can be split between me and the wife to avoid the 40% bracket. No claiming of expenses without reciepts etc