So I’ve started the ball rolling for going LTD and whilst musing on the phone with the banking advisor.. I had a “what am I doing” moment.. dividend tax is increasing so that it’s about 27%ish for all dividends paid out after 5k… there aren’t many business expenses that I claim and if I go VAT registered its a lot more paperwork hassle and I think it’ll put off some of my clients… so I was just reassessing why am I doing it…

My only thought is that it’s good to be able to decide when the business pays out to me so I’m not forced to pay tax on profits every year only the money that is wages / dividends paid out.. However thats made me think why the hell don’t I just stop working when I reach that cap and go on holiday! (higher bracket cap)..

Has anyone else regretted going LTD or are their other perks I’m missing as at the moment it just sounds a little more expensive than doing what I currently am..

I don’t have dreams of growing massively and like the freelancer style of my business..

Undecided now… bugger!

Dividend tax is changing from 0%/25% to 7½%/32½% isn’t it ? For basic/higher rate. Don’t forget that dividends don’t attract NI, there’s still that saving.

Downing tools when you reach ~43k (or whatever it is) is certainly one approach but better IMO to build up retained profit in the company so that if work dries up for a while you can still pay yourself while you’re “on holiday”.

Talk to an accountant that specialises in one-man-band limited companies, they’ll be able to give you worked examples of how it all hangs together.

Oh, and:

My only thought is that it’s good to be able to decide when the business pays out to me so I’m not forced to pay tax on profits every year only the money that is wages / dividends paid out..

Get the terminology right 🙂 The business will pay tax on profits every year (assuming it makes them). Its profit is after salary, but before dividends. You can adjust your salary as you go along but probably best to max out your personal allowance with salary and then take the balance as dividends. If you’re going to go into the higher tax rate you might want to leave the money in the company for a rainy day when you can draw it out at standard rate.

I’m still new to being a Ltd Co, this is my understanding of it so far !

If most clients are vat registered ang you don’t have many expenses that’s a very good reason to go flat rate vat wich should bring in extra money. Unless your income is guaranteed (and if it is I’d then be worried about ir35) don’t stop at higher rate as you’ll need a war chest for quiet times.

I’m regretting it massively – set things in motion 15 months ago and my incompetent (+expensive) accountants have screwed up everything from transfer of VAT number to any number of administration errors, which still aren’t ironed out, causing me a headache with HMRC.

My only hope that this has actually saved me some cash is the fact that I’ve turned over £160k, with £60k profit in the past 6 months and they will make it work for me.

Currently got £40k stashed away to pay the massive VAT bill that’s due, as they filed a nil return last quarter and I have to go back and re-issue invoices from last June (a pain, because that was part way through a previous VAT quarter) and re-calculate VAT owed/paid from then up to the next quarter at the end of March.

All I seem to do lately is employ incompetent idiots in various roles of my business

*raises hand* I’m an incompetent idiot looking for a career change. Giz a job 😀

Downing tools when you reach ~43k (or whatever it is) is certainly one approach but better IMO to build up retained profit in the company so that if work dries up for a while you can still pay yourself while you’re “on holiday”.

This.

In this and previous years we’ve paid ourselves upto the ‘cap’ and no more, rather than stopping work at this point.

I do though need to work out what is the most tax ‘efficient’ amount for 2016/17 – anyone know already?