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SEW247

Self Employed / Ltd Company

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So the GF has now been doing some consulting work and it is all going well, but we're in desperate need of some help in regards to what we should be doing to minimise tax. In a nutshell:

- she was made redundant at end of march 2013 having been PAYE all year.

- she registered as self employed on 01 April 2013 but had no self employed income in the last tax year, (I.e. from 01 to 05 April 2013) but had expenses from March 2013 for a conference which she knew she would be attending in late April 2013 as a self employed consultant.

- provides consultancy advice for companies and is currently working for several companies 3 days p/w at £500 p/d, started in 2013-14 tax year.

- has to travel to their offices in central London.

- has a phone which is used for business / personal calls.

- bought a laptop which is used for work.

My main questions relate to what she is entitled to claim in terms of business expenses and also whether it would make sense for to set up a Ltd company or stay as self employed.

To complicate things, since registering as self employed HMRC asked her to complete a tax return for 2012-13 tax year (i.e. to cover the period of 4 days she was self employed!) Presumably she can do this online, fill in all PAYE income form 2012-13 and then have any business expenses she had in March deducted?

On the basis that she is (roughly speaking) earning £6k per month would it make sense for her to setup as a ltd company, but taking into consideration she may go back to PAYE after 6 months.

If so, how easy is it to do this? And would it make sense to use one of those fixed price accoutancy firms to do it all for her? (if so, can anyone recommend a firm to do all the hard work for her!)

Thanks

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go see an accountant.

prolly suggest LTD due to Corp tax advantages and the volume she is producing.

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I seem to think a lot of people that go self-employed as a stop-gap to finding another PAYE job can find it's hard to get HMRC to stop demanding tax returns are filed. I understand people want to do things by the book but sometimes it can be a good idea to see how things pan out first before plonking yourself on the authorities' radar.

If she ends up only doing it for a few months before getting another PAYE job there would probably never be any come-back from it. If she decided to take it further she could just incorporate and the period immediately before would just get lost in the wash. There's also vat to consider, as well, a lot register immediately but I'd think about waiting to ensure you'll breach the threshold.

One thing I would say from experience is HMRC/authorities don't reward people that are trying to do things right.

Just claim everything a reasonable person would consider a business expense, there's probably stuff like using some of your house as a home office as well.

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Couldn't really say. Both beat PAYE hands down for tax, 'cos you have flexibility to optimise your affairs. Either way, keeping your accounts in order will keep the accountant's bills down.

Self employed - much lower NI.

Own company - offers common wheezes to avoid NI, and the flexibility to leave money in the company means you can smooth over good and bad years rather than pay high rate one year and lose your tax allowance the next.

Oh, and bear in mind it's not just about tax: sometimes clients may be happy to do business with one legal entity but not another. That was my #1 reason for going the limited company route back in the day.

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I seem to think a lot of people that go self-employed as a stop-gap to finding another PAYE job can find it's hard to get HMRC to stop demanding tax returns are filed. I understand people want to do things by the book but sometimes it can be a good idea to see how things pan out first before plonking yourself on the authorities' radar.

But with the online facility, the tax return is not a hardship. In fact, I rather enjoy the annual ritual of claiming my rebate (this year's arrived just yesterday in my bank).

If she ends up only doing it for a few months before getting another PAYE job there would probably never be any come-back from it. If she decided to take it further she could just incorporate and the period immediately before would just get lost in the wash. There's also vat to consider, as well, a lot register immediately but I'd think about waiting to ensure you'll breach the threshold.

VAT is more paperwork and hassle. The upside is, it's easy to deregister if you're no longer in the game (as I did when I moved back to PAYE and my company's income fell to pocket-money levels).

One thing I would say from experience is HMRC/authorities don't reward people that are trying to do things right.

That sounds worth an anecdote :D

My experience of HMRC has been more positive than with some of their peers: for example, getting a US taxpayer number was a nightmare.

Just claim everything a reasonable person would consider a business expense, there's probably stuff like using some of your house as a home office as well.

That's what an accountant is good for: they'll know what HMRC are happy with and what'll risk causing grief.

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I have found all the tax authorities related to thebusiness more than helpful since my accident.

DVLA though are the opposite.

Mr car is destroyed and towed.

I cant claim the tax back without the disk and by the time I realised this, my injuries had disabled me somewhat. i had to apply online for a V33? to claim where the tax disk was not in my possession.

Being honest, I couldnt say the vehicle had been sold or transferred as I hadnt agree a payout at the time. I wrote clearly along with the form the vehicle was offroad, i was injured and unable to collect the disk, and that the vehicle was destroyed and at RSAs yard.

Letter arrived yesterday, all preprinted stuff saying they couldnt make a decision as I wasnt clear as to where the vehicle was.

THats delayed the claim for another month, which will be costing me money.

Even then, the options on the return didnt quite match the reality.....bloddy tickboxers.

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I seem to think a lot of people that go self-employed as a stop-gap to finding another PAYE job can find it's hard to get HMRC to stop demanding tax returns are filed.

I've never found that. As soon as i stopped earning extra (ie my self-assessment resulted in a 20p bill) they told me they would not send me one next year. (They let me off the 20p too)

Personally if you're only planning on being self-employed in the short term i wouldn't bother with the ltd company route.

Self assesment is easy. And you still get to claim business expenses.

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So the GF has now been doing some consulting work and it is all going well, but we're in desperate need of some help in regards to what we should be doing to minimise tax. In a nutshell:

On the basis that she is (roughly speaking) earning £6k per month would it make sense for her to setup as a ltd company, but taking into consideration she may go back to PAYE after 6 months.

I'd suggest you contact a few local accountants for an initial discussion. Then decide whether to use one or not based on how you get on with them and how much they quote. The fee for setting up a company and preparing and filing accounts, tax returns and companies house returns is tax deductible and if your GF's income is as high as you indicate she will be a higher rate taxpayer so the after tax costs of an accountant will be 40% less.

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and if your GF's income is as high as you indicate she will be a higher rate taxpayer

That can be avoided. If she incorporates as a limited company, one route to do so is to leave money in the company, and draw it when she has a bad year or takes substantial time off.

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I have found all the tax authorities related to thebusiness more than helpful since my accident.

DVLA though are the opposite.

Mr car is destroyed and towed.

I cant claim the tax back without the disk and by the time I realised this, my injuries had disabled me somewhat. i had to apply online for a V33? to claim where the tax disk was not in my possession.

Being honest, I couldnt say the vehicle had been sold or transferred as I hadnt agree a payout at the time. I wrote clearly along with the form the vehicle was offroad, i was injured and unable to collect the disk, and that the vehicle was destroyed and at RSAs yard.

Letter arrived yesterday, all preprinted stuff saying they couldnt make a decision as I wasnt clear as to where the vehicle was.

THats delayed the claim for another month, which will be costing me money.

Even then, the options on the return didnt quite match the reality.....bloddy tickboxers.

I can sympathise.

I wrote my new car off 4 days after picking it up with only 200miles on the clock but had the foresight to get the tax disc from the garage. DVLA claimed never to have received it (how convenient/sent in February), lots of hassle with the V33 and only squared away last week. 1-0 to the DVLA thieves.

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  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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