Great video could you do a new up to date video for 2019 as your knowledge will be even better now and I could definitely use your knowledge thanks Aaron.
all depends on total income, self employed high rate could pay 40% or even 45%. if you lower earning go for self-employed, If you high earner go for limited
A more common method is for the director to take the minimum salary and take the profits (after tax) as a dividend (subject to cerain restrictions) and have dividend tax deducted from this.
33% for tax and NI sounds way too high. I'm going self employed soon and it'll work out that the HMRC will be paying me back in tax because I'll be voluntarily registering for VAT. The nature of the work means that I'll be able to claim back for fuel/mileage (whichever pays more), 20% back on my leased vehicle and I could probably claim for my insurances. I'll also likely be getting an accountant and they're a "business expense" so hopefully I'd be able to claim for that. Because I'll be starting in 2 weeks time and it's getting incredibly close to January, I definitely need advice from any accountant I register with. For example; could I carry over expenses incurred from January 2018 and claim for those in January 2019 (or January 2019 for January 2020)? That's the sort of thing that's confusing and there's no point in having everything processed on January 31st. Edit: When I was employed, I was only paying between 14-15% Tax and NI combined. 33% is a load of crap.
I don't think that makes sense at 10:00. If the Expenses come before the tax and NIC are applied, and Wages are part of those allowable expenses, how and when do you need to pay the tax and NIC on the wages?
Great video although correct me if i'm wrong, I think you explained the 'filing an invoice for your wage to the company as a director' wrong !!!! You said it would go down as a sale as appose to an expense.
So... Why would a director invoice the limited company? The £85 saves ct at 20% and then incurs tax and nic at 33%. Surely, it would be better for the company to invoice the sole trader to increase the profit in the company and reduce profit from self emolument to nil. But what do I know.
Hi Rob. Great question. But here's the thing... if the self employment is then NIL, what does the Director live on? Remember - the 'limited company' is a legal entity in its own right. The Director is an individual in his/her own right. The two are not the same.
As a self employed sub-contractor (shopfitter). I get taxed at sorce. So i only get the net. and then i get an accountant to fill in my self assessment every year. But i want to form a Ltd company still doing the same thing (shopfitting) . Should put down my house as the registered place for my new ltd company. How do i get paid ? can i invoice myself . confused
You can put your house down as your registered place or use your accountants address. The limited company (separate legal entity) would do all the billing for the work. And when YOU, the person "John Duffy" wants to get paid, you are either on the payroll for the Ltd company, or you "JD" send an invoice to the business and get paid. Best to speak to your accountant to see if this would be a good option for you.
So I (the ltd company) . Invoice the company I do work for. Instead of taking out the tax the company gives me (the ltd company)the gross. I then as a self employed invoice myself leaving zero in my ltd companys bank. Resulting in no profit. I then as a self employed shopfitter pay my 20% and NI. ?
John Duffy Yes. But speak to your accountant to see if that makes sense for your situation because everyones circumstances are different. You'd have the additional burden of having to file year end accounts and a corporation tax return for your limited company. (An extra cost).
is stock classed as an expense, as in if i had 100 but i needed to re buy the stock at 50 would i then file my profit as 50 or would the tax see it as 100 still
thanks so much for all the info, great vid . One thing confused me, which was when the co director invoiced the company to avoid tax and you wrote this income is their sales on their self assessment. I got a bit confused about how it is income, as you're taking money out of the company, isn't it then a cost? I thought it must be a cost in order to cancel out the profit and thus the tax isn't applicable. Please explain if possible . thanks.
Hi TheBathroomGirl ... Remember that the 'limited company' is a completely separate legal entity from the 'individual'... so there's always two sides to every transaction... so when a company director invoices the company (or anyone for that matter)... the company will indeed account for that as an expense... money is leaving their account. HOWEVER, on the co. directors side... they're getting money IN... and this money, from the sale of their 'service' to the company, needs to be accounted for as 'sales income' on that company directors self assessment statement. If the director did not account for any of his/her income coming in, this would be dodging tax. I hope that helps. Sorry if I didn't make that clear in the video.
@@booglesb I'm pretty sure this would be dodging tax anyway. As a director you are not providing a service to the company it is a statutory duty. You can't act as a "freelancer" and in any case it is not really that tax efficient as you then have to pay Income tax and NI contributions as a self employed worker. It's far better to take a salary take the minimum salary you can and top this up with divedends
I dont get who you avoid tax by giving an invoice, I thought you said an invoice goes down as a sale... Sales are taxed... I dont understand... Unless it goes down as an expense.... Is it so everything goes down as an expense.
An invoice that you send is a sale. This will increase your income. The higher your income, the higher your net profit - the more corporation tax there is to pay. If you receive an invoice, this increases your expense, lowers your net profit - so the less tax you have to pay. Do consult an accountant or a financial person for your own individual case.
At 10:53, Sorry I don't get why the corporate tax 20% (for the payroll?) is avoided by that directors send invoice of payroll back to the company. It means that the payroll/salary is not allowable expenses for tax purposes, so the allowable expense is the same between no invoice and invoice cases. Can you guide me through again? :|
+Thanh Nguyen Kim - listen to the video from about 8m 30. It is explaining that by bringing the PROFIT DOWN to nil (by adding an expense to the company), then no corporation tax is payable...because the 'profit' is NIL. The director is not 'invoicing back payroll'. The director may send his/her own company an invoice for their own service.. however REMEMBER this income that the Director gets would be put on their own personal self assessment tax return. Best thing - as I say to everyone - please do seek independent accounting advice for your own unique situation.
The info about IR35 is available on the HMRC website here: www.hmrc.gov.uk/ir35/ ... To work out how IR35 may apply to your individual situation - always best to seek advice from a qualified tax accountant.
This tax system is too complicated for me when I joined an agency job. I need to know what is the best for agency worker, what tax systems is the best options? Please give me advise .
If you are working for an agency, then you'll be on their payroll and will be taxed at source directly from your pay check. All your tax obligations are met by your employer. They deduct it from you and pay to the government. Speak to an accountant or a tax person for your individual case.
Hi thanks for the comment. I consulted freestyle accountant and they are quick to respond I had good adviser. Hopefully things will get better soon regarding my finances. Tnx again.
SteveLondonSky Considering how complex the subject of tax is I thought this WAS pretty short. It's free advice too, are you really complaining about it?
