[ayoungh]

Just saw this.... linky and am thinking to take advantage of a free LTD as i can then claim back on certain things etc.

Can someone advise me on this and what paperwork would I need to submit etc?

[Ste Hughes]

Don't

When you add in accountancy and the extra rules ect you will be worse off unless your making 60k+ year.

What would you like to claim back on that you can't as self employed?

From memory HMRC only charge peanuts to register as a LTD company.

Just because its free does not mean its a good time to do it.

[pandadoodle]

You go ltd and you aint pulling in the cash and problems start. You can't dip into the business account like you can as a sole trader. You have to pay yourself all sorts, unless its worth it or it means youll get that 70k+ tender leave it for now

[CityCM]

ayoungh, on 27 September 2011 - 11:31 AM, said:

Just saw this.... linky and am thinking to take advantage of a free LTD as i can then claim back on certain things etc.

Can someone advise me on this and what paperwork would I need to submit etc?

What advantages do you think becoming a LTD would give you?

[Barney]

I agree with Ste Hughes. The only real difference with LTD and Sole Trader is Limited Liability - you can still claim all the same stuff back and even register for VAT.

The problem with LTD is you HAVE to use an accountant to sign-off your accounts, at the very least. And accountants don't come cheap.

The flip side is that if you actually want to slowly develop your freelancing into an established business then going Limited would make sense. It also gives you a bit more weight when talking to larger companies. Plus if you register now, you will be able to get business financing with the likes of Apple after about 2-3 years worth of accounts.

[CityCM]

Barney, on 27 September 2011 - 11:50 AM, said:

I agree with Ste Hughes. The only real difference with LTD and Sole Trader is Limited Liability - you can still claim all the same stuff back and even register for VAT.

The problem with LTD is you HAVE to use an accountant to sign-off your accounts, at the very least. And accountants don't come cheap.

The flip side is that if you actually want to slowly develop your freelancing into an established business then going Limited would make sense. It also gives you a bit more weight when talking to larger companies. Plus if you register now, you will be able to get business financing with the likes of Apple after about 2-3 years worth of accounts.

As far as I've seen, Apple do offer business financing to sole traders with 3 years worth of accounts.

[pandadoodle]

If your a limited you can get a trade account almost anywhere, sole trader normally after 2-3 years

[ayoungh]

Thanks all, My main reason for thinking to do this is:

I would like to Claim back on some of the following:

Broadband
Rent - percentage
Phone - percentage
Plugins / graphics etc I buy online? Not sure if this counts?
.Net subscription
Hosting

Also I would like to eventually employ a developer and work with him or her in a company of my own.

[pandadoodle]

Why are you not claiming that back now?

[CityCM]

I don't know a whole lot about doing tax returns but as far as I'm aware, everything you've mentioned in your post can be claimed against tax as a sole trader. You can also employ people as a sole trader as long as you register with HMRC as an employer.

[Ste Hughes]

The only thing you want to claim back for that I don't right now is rent.

Get a PAYG phone and 'use' that for personal. You can then claim all your other phone.

Of course graphics/fonts count. Just print out the paypal receipt. You need this to work why can't you claim?

.Net and hosting again no reason why not thats perfectly reasonable.

If your employing someone you can still do that as self employed. I do.

If you get to that point though in this field you will need to pay them 20-30k if not more.

Your going to need to be turning over double that to make it worth it.

Thats the magic 60k. Once you hit that LTD yo self bro.

[CityCM]

I must admit, I myself have considered making our company a LTD before now but it just seems to be full of headaches. All sorts of forms to fill in every year, accounts that need to be done by an accountant, etc...you need to think is it really worth it?

I do agree that being a LTD could very well give you an advantage with some bigger companies but smaller companies may avoid you because they might think you're too big to offer personal service.

[pandadoodle]

Tony you claiming a % of your bills as well (house hold) I assume not? Because you can... you have to be careful on claiming rent back as if the landlord does not want you working from there it can end up with you being kicked out, believe me I know! lol

[CityCM]

I've just been reading up on LTD companies and it appears that corporation tax is lower than income tax and you don't have to pay NI Contributions on 'profits' if you're a LTD company. Is that correct? If so, it might well be worth considering afterall.

[Ste Hughes]

CityCM, on 27 September 2011 - 12:22 PM, said:

I've just been reading up on LTD companies and it appears that corporation tax is lower than income tax and you don't have to pay NI Contributions on 'profits' if you're a LTD company. Is that correct? If so, it might well be worth considering afterall.

As soon as you withdraw profits from the company and pay yourself you have to pay NI and income tax at the same rate.

[pandadoodle]

Ste is 100% correct, if your just starting out and go down the ltd you could end up paying tax twice...

[CityCM]

Yeah I understand that but at the moment all money our company makes stays in the company but as a sole trader, we currently pay NI and Income Tax on the profits.

Is it a requirement for directors of a LTD company to take a wage?

[pandadoodle]

CityCM, on 27 September 2011 - 12:39 PM, said:

Is it a requirement for directors of a LTD company to take a wage?

How you going to buy food?

[zed]

you don't have to take a wage and take as dividends instead. Just be careful of not paying any NI - depending on your pension status.

[CityCM]

pandadoodle, on 27 September 2011 - 12:40 PM, said:

How you going to buy food?

I have other incomes that are paid as PAYE as well as the business so at the moment I don't need to take money from the business if that makes sense.

This post has been edited by CityCM: 27 September 2011 - 12:46 PM

[pandadoodle]

Might be worth it then CityCM

Zed, you can't take dividends like you used to anymore, at least that was my understanding anyway.

[ayoungh]

So If I go self employed, what paper work will I need to fill out and how would I claim / how does the claiming work? The deal is I live at home with mum and sisters but Im the oldest and I bring in the money to pay the bills - (Rent)

[zed]

this may help? http://www.startups....ng-up-a-company

[Barney]

As a director of a limited company you can do the following:

Pay yourself a basic salary of around £6000 a year (can't remember the reason for this, might be to get NI), then pay yourself dividends. This means you pay NO tax at all on your income, as long as you don't go over the basic rate tax allowance of approx £48000.

The business then pays 21% corporation tax on profits.

If you are able to take a tax free income of £40000 from the business, this equates to a salary of about £70k.

It is a very tax efficient way to pay yourself.

BUT, it is only really worth doing this until you are generating over a certain amount, around £50k - £60k a year, as the accounting costs start to add up, filing company returns, PAYE etc etc...

[Ste Hughes]

ayoungh, on 27 September 2011 - 12:55 PM, said:

So If I go self employed, what paper work will I need to fill out and how would I claim / how does the claiming work? The deal is I live at home with mum and sisters but Im the oldest and I bring in the money to pay the bills - (Rent)

You just register on the HMRC website

Do your own accounts in excel or w/e (there are programs that do this)

Simply document any money that comes in, any money that comes out.

work out how much profit you made.

work our your own tax on the profit and submit this every october to HMRC and pay what you owe online.

Its nice and easy

[Barney]

As far as I know, if you go Self Employed the only thing you need to do is notify HMRC within 3 months of starting as a sole trader. Then make sure you collect receipts for EVERYTHING and keep a track of all payments and income.

The you will just need to file a personal tax return in April...

Not sure how it works if you live with your mum, but you can claim 'use of home as office' allowance. Basically lets you claim a portion of all bills - not sure if includes rent.

[ayoungh]

Ste Hughes, on 27 September 2011 - 01:01 PM, said:

You just register on the HMRC website

Do your own accounts in excel or w/e (there are programs that do this)

Simply document any money that comes in, any money that comes out.

work out how much profit you made.

work our your own tax on the profit and submit this every october to HMRC and pay what you owe online.

Its nice and easy

With documenting money in and out would this be like:

Client in: £300

out: rent etc

But only company stuff right?

Whats the tax rate I need to consider?

If i registered now? as its oct soon, would I need to submit?

Thanks everyone! Really great advice!

[CityCM]

Barney, on 27 September 2011 - 01:04 PM, said:

As far as I know, if you go Self Employed the only thing you need to do is notify HMRC within 3 months of starting as a sole trader. Then make sure you collect receipts for EVERYTHING and keep a track of all payments and income.

The you will just need to file a personal tax return in April...

Not sure how it works if you live with your mum, but you can claim 'use of home as office' allowance. Basically lets you claim a portion of all bills - not sure if includes rent.

From what I remember from a chat with an accountant a couple of years ago, if a room in the home has the sole purpose of being an office, you can claim rent for that room in the house so if your house has a living room, dining room and 3 bedrooms and your rent is £500/m, you would be able to claim tax relief on £100/m for the use of a room as an office.

[CityCM]

ayoungh, on 27 September 2011 - 01:07 PM, said:

With documenting money in and out would this be like:

Client in: £300

out: rent etc

But only company stuff right?

Whats the tax rate I need to consider?

If i registered now? as its oct soon, would I need to submit?

Thanks everyone! Really great advice!

If you register now, you would need to keep records from now and in April you will be asked to complete a tax return (which has to be submitted by October if doing paper version or January if doing online version.

[ayoungh]

CityCM, on 27 September 2011 - 01:09 PM, said:

If you register now, you would need to keep records from now and in April you will be asked to complete a tax return (which has to be submitted by October if doing paper version or January if doing online version.

Would that be the Jan coming ?

[CityCM]

ayoungh, on 27 September 2011 - 01:19 PM, said:

Would that be the Jan coming ?

No, because you're only registering now, your tax year would end April 2012 so your tax return would need to be submitted by Jan 2013. It might make more sense to hold off becoming self employed until April 2012 though if you can as then your actual year end would tie up with the tax year.

[ayoungh]

CityCM, on 27 September 2011 - 01:27 PM, said:

No, because you're only registering now, your tax year would end April 2012 so your tax return would need to be submitted by Jan 2013. It might make more sense to hold off becoming self employed until April 2012 though if you can as then your actual year end would tie up with the tax year.

Yea this makes sense. Gives me some time to look more into it.

[pandadoodle]

Tony If I was you id ring up a local accountant and get some free advice over the phone, if you have a business banking account you should have a few hours free accountancy advice with the bank account as standard.

[Renaissance-Design]

pandadoodle, on 27 September 2011 - 02:09 PM, said:

Tony If I was you id ring up a local accountant and get some free advice over the phone, if you have a business banking account you should have a few hours free accountancy advice with the bank account as standard.

This. At the end of the day, we can only give you our experience, whereas an accountant will be able to give you up to the minute advice tailored to your business. You wouldn't ask your accountant for web design advice, would you?

This post has been edited by Renaissance-Design: 27 September 2011 - 02:19 PM