Need very basic help/advice please

[watt tyler]

Hello everyone,

Can someone help or shed some light on these very basics questions regarding Limited company setup please.?

I have setup a limited company and have an accountant who will be doing PAYE etc, for me each week...Not given the go ahead as of yet tho'..

Am totally new to this but cannot grasp the following..the accountant seems to waffle on a bit when asked these questions...

I have formed a limited company bank account also..

So, theoretically, each week my salary goes into the Company bank account and the accountant pays me a certain amount each week into my own personal bank account .Is this how it works......Do I decide this amount or does the accountant??

Also, do I pay for company related items such as petrol/laptop/mobile phone bills etc,with my limited company debit card or my own bank account debit card.???

I cannot get my head around the benefits of the limited company and the VAT aspect...the accountant says I will be financially better off each week if I go limited???

Big apologies for the basic questions but am totally new to all aspects of setting a limited comapny up and the operational aspects of this..

Many thanks....Watt..

[cojak]

Welcome Watt!

Take a gander at the First Timer section, this will hellp you with many of your questions.

And the limited companies section will also help.

Limited Companies - Contractor Ltd Co Guides :: Contractor UK

Once you've read them come back with anything you don't understand and we'll do our best to help.

[Old Greg]

WCS

How much is your accountant charging? Unless it is very cheap AND you are very tight, speak to a decent contractor accountant like SJD or Nixon Williams.

[Wanderer]

I have setup a limited company and have an accountant who will be doing PAYE etc, for me each week...Not given the go ahead as of yet tho'..

I'd tell the accountant to explain it to you a bit better. If they can't then you should have a look for a new one. You probably want to have a really good chat with an accountant to get you up to speed, don't do business without one or you will get into a terrible mess. You're going to have to pay about £70-130/month for this. A few accountants hang out here and give good advice. Do a search and you will find them - I'd suggest you engage one of them to do your accountancy if you aren't happy with the accountant you have got lined up.

The link that Cojak gives should have most of the detail you need but there are a few concepts you have to understand:

So, theoretically, each week my salary goes into the Company bank account and the accountant pays me a certain amount each week into my own personal bank account .Is this how it works......Do I decide this amount or does the accountant??

The money that goes into your company is the company's income, not yours directly. Think of the company as an entity in it's own right (albeit one that you control), so the money the company takes in fees belongs to the company, not you personally. As director, you decide (with some advice from the accountant) what to do with the money. Most likely you will pay yourself a salary of about £6500/year. Keeping the salary low means that your company doesn't have to pay employer's NI (12.8%) and then you have to pay Employee's NI ~10% or even PAYE.

After operating expenses (travel, hardware, phone etc) what's left is profit which the company pays corporation tax on this at 21%. The company then pays a dividend to it's shareholders (you, and perhaps your spouse too if they don't have any other income) from the profits. Here's the tax avoidance bit: You don't pay any Employer's or Employee's NI on the dividend and the corporation tax paid means that you don't pay PAYE either. If the salary + dividends exceeds £48,000 or so then you have extra tax to pay and you should get specialist advice from your accountant.

You can only do this tax avoidance if you are outside IR35. Click the link on the right that says IR35 and try to understand it, it sounds scary at first but actually a lot of people trade outside IR35. Your accountant should be able to review your contract and advise you.

Also, do I pay for company related items such as petrol/laptop/mobile phone bills etc,with my limited company debit card or my own bank account debit card.???

You can pay it out of your own pocket and reclaim it from the company or you can pay it directly from the company account. I would respectfully suggest that you pay it from your own pocket initially until you understand what you can legally claim as expenses. If you go paying for all sorts of stuff out of your company account which is not claimable then you will give your accountant a headache. Your accountant will advise on this, also read the link on the right side of the page regarding expenses. Don't make the mistake of thinking that everything you expense through your company is "free" - it's not. It just means that you avoid paying tax on that amount so it's effectively a discount of about 30% if you can expense it.

If you're really stuck for money in the short term, you can take a loan of up to £5,000 from your company without causing headaches and then get your accountant engaged to fix you up with a monthly salary and dividend payments as appropriate.

I'm not going to explain VAT, read the link on the right that says "VAT / Flat Rate VAT", it's got a really good explanation.

Good luck!