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Thread: Starting a Limited Company

  1. #1
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    Default Starting a Limited Company

    I have been thinking about this for some time and wondered if anyone had any first hand exp?

    The proposed plan is
    Set up a LTD company
    Apply to some agencies who deal in short term contracts
    Work for these agencies with the wages being paid into the company

    I know I need insurance and that I can claim bits back for the VAT

    The thing I'm not getting is how the dividend bit works. How do you pay yourself from the dividends (and ultimately only pay 20% tax)

    Any advice would be most welcome!

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    Regular Member Ben50n's Avatar
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    I would have thought Google is your friend on this one?

    Maybe also look at the Gov or HMRC websites?

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    Regular Member AntSSSS's Avatar
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    Default

    You pay yourself a basic - and I mean basic wage - and the rest is taken as dividends.

    the best advice is get an accountant to do it all for you.. they will set the company up for you and every month they will send you a spreadsheet to fill in etc.. Then they will work out what you can and cant take out the company,

    You have to make sure that you have money in the company account for corp tax etc. I work in IT and a lot of people I employee are 'contractors' and have this very setup.. None of them would do it without an accountant working the books.

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    Quote Originally Posted by Ben50n View Post
    I would have thought Google is your friend on this one?

    Maybe also look at the Gov or HMRC websites?
    I have spent a while searching those but there is so much conflicting information it becomes a mess really quickly

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    Quote Originally Posted by AntSSSS View Post
    You pay yourself a basic - and I mean basic wage - and the rest is taken as dividends.

    the best advice is get an accountant to do it all for you.. they will set the company up for you and every month they will send you a spreadsheet to fill in etc.. Then they will work out what you can and cant take out the company,

    You have to make sure that you have money in the company account for corp tax etc. I work in IT and a lot of people I employee are 'contractors' and have this very setup.. None of them would do it without an accountant working the books.
    Thats the line I thought I may have to head down but just wanted to know what others do and how it works before committing myself. Guess I need know the good the bad and the damn right ugly before I jump from a well paid job!

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    Regular Member Derek Mc's Avatar
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    Would you not be best starting off as a sole trader, (or partnership with your wife on tax reasons!) then once income reaches the threshold register for VAT, then go Limited?

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    Even better start working for an umbrella company and eventually look into your own ltd company?

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    it is complicated, i have looked into it before.

    limited is only for £60k+ turnover tho isnt it (no idea what the turnover will be obvs)

    the best advice is to find a good accountant tho, you can write off the cost against tax too afaik.

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    Regular Member Samdy Gray's Avatar
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    Quote Originally Posted by the_wave_rider View Post
    The thing I'm not getting is how the dividend bit works. How do you pay yourself from the dividends (and ultimately only pay 20% tax)
    Dividends are paid from net profits which mean you've already paid corporation tax on them (20% for profits below £300k). Due to this, the dividends have a 10% tax credit which satisfies the basic rate tax liability i.e. if you pay yourself £90 the deemed gross payment is £100. So if the dividends you take are within the basic rate tax band, you will have no further tax to pay on them. Any dividends in the higher rate tax band will be subject to a further 22.5% tax.

    An accountant will be able to help and will advise that you should also pay yourself a small salary. A salary of £136 per week will mean you accrue National Insurance credits without actually paying any NI (so you'll still qualify for state pension and other benefits) and as the salary will be below the personal allowance there'll be no tax to pay on it.

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    Regular Member keith1983's Avatar
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    It might be wise to get yourself to the Citizens Advice Bureau and see if they can offer you any free advice?

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