Self-employed benefits loophole

[Sysman]

I imagine there is a point where additional personal income tax & NI is actually less that Corp tax + Employers NI + costs of running ltd (assuming you want all the money you generate yourself).

IIRC the claimable expenses regimes are similar.

Not sure where that point is, but I'm sure somebody who is quite bored will work it out for us all..

I went into this in the late 1980s. My accountant told me the crossover point was something like 30K profit. Less than that profit I would be better off as self employed, though I suspect there were different crossover points for different types of business. The figure may have been very different if I had been running a family business.

Obviously this figure has changed over the years, and not just due to inflation, but to changes in various tax rates and bands. Every accountant I talked to when I finally went contracting in the 1990s told me that my turnover was too low for a limited company and I should be self employed, but that was unacceptable to IT agencies.

[Cyberman]

He's not entitled to contributions-based JSA but surely they are entitled to other benefits such as housing, child, council tax and tax credits because of her low income. This does not make sense to me at all.

[Moscow Mule]

I know several self-employed peeps in my area - they won't go Ltd because they worry about the cost of an accountant. I've pressed them to try to understand what they mean and they're convinced that being Ltd will cost them more money than being SE so they won't convert.

EDIT: I suspect they haven't explored the low salary / high divs route

I imagine there is a point where additional personal income tax & NI is actually less that Corp tax + Employers NI + costs of running ltd (assuming you want all the money you generate yourself).

IIRC the claimable expenses regimes are similar.

Not sure where that point is, but I'm sure somebody who is quite bored will work it out for us all..

[Mich the Tester]

I know several self-employed peeps in my area - they won't go Ltd because they worry about the cost of an accountant. I've pressed them to try to understand what they mean and they're convinced that being Ltd will cost them more money than being SE so they won't convert.

EDIT: I suspect they haven't explored the low salary / high divs route

My accountant costs me about 2000 euros per year. He saves me a lot more in terms of getting every last cent out of all the possible tax breaks.

[Platypus]

Why wouldn't anyone do that?

I know several self-employed peeps in my area - they won't go Ltd because they worry about the cost of an accountant. I've pressed them to try to understand what they mean and they're convinced that being Ltd will cost them more money than being SE so they won't convert.

EDIT: I suspect they haven't explored the low salary / high divs route

[Mich the Tester]

No it doesn't imply a Ltd Co. There are many self employed people who employ others (from corner shop to the entertainment industry) and of course they have to pay employers' NIC at the prevailing rates for the salaries/wages they are paying.

Unfortunately, had he gone the Ltd Co route when times were better, then he would have had the option to put that into receivership and not gone personally bankrupt.

Difficult to imagine. Although here on the continent Ltds are expensive (18,000e capital plus 2000e solicitors fees), in the UK you can set up a Ltd for less than 100 pounds, as I understand it. Why wouldn't anyone do that?

[Sysman]

"If I didn't pay my employers National Insurance contributions when I had my business I would have been threatened with legal action, but when I'm in a situation where I need help I can't get any," he says.


The bit in bold implies that there was a Ltd Co involved. So why no class 1 NIC on his earnings?

No it doesn't imply a Ltd Co. There are many self employed people who employ others (from corner shop to the entertainment industry) and of course they have to pay employers' NIC at the prevailing rates for the salaries/wages they are paying.

Unfortunately, had he gone the Ltd Co route when times were better, then he would have had the option to put that into receivership and not gone personally bankrupt.

[Pondlife]

How has he ended up personally bankrupt and with no savings? Isn’t the point of an Ltd that the business can lose money but your liability is limited to the money you’ve put in?

Unless he was stuffing his savings back in to keep it afloat.

[Mich the Tester]

How has he ended up personally bankrupt and with no savings? Isn’t the point of an Ltd that the business can lose money but your liability is limited to the money you’ve put in?

[Pondlife]

"If I didn't pay my employers National Insurance contributions when I had my business I would have been threatened with legal action, but when I'm in a situation where I need help I can't get any," he says.


The bit in bold implies that there was a Ltd Co involved. So why no class 1 NIC on his earnings?

[blacjac]

How was he classed as self employed if he ran a recruitment business employing 20 people? Why was he not paying employers NI on his own salary.

What am I missing here as it makes no sense to me whatsoever.

Perhaps he didn't take a salary or form a Ltd Co....


It's quite common, my father in law is a builder who employs 2 labourers..

There is no Ltd co involved, all the money he gets in is his. He pays his staff & expenses out of this money, what is left is his to keep. He then declares this on his annual SA and pays the relevant taxes.

[Pondlife]

How was he classed as self employed if he ran a recruitment business employing 20 people? Why was he not paying employers NI on his own salary.

What am I missing here as it makes no sense to me whatsoever.

[Mich the Tester]

Oh the joys of socialism.

[denver2k]

Going from self-employed to unemployed