If you are not paying your NI's, how are you accumulating the "years" for your state pension?
[Rant] Tax Credits
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The reason that I went Ltd from the start.
By examples.
Today, I was working on a production CNC machine tool.
1988 vintage, still worth over £20k on the open market, if available, as it is the lower end of the food chain, similar specified machines of a more popular and reliable nature are still fetching 2-3x this value, so say up to £60k for a 36 year old machine!
If I muck this up and write it off, then the customer can only come after the Ltd. Co. which I could wind up before he does.
If I muck this up and burn his factory down, he has about 40 of these things, and this is one of the cheapest, so a bill of £ "stupid" k, just for the machines without liability for loss of profit, business, employee wages etc.
I have two customers where the buildings were put up around their large machines, so to replace them would need sections of the building roof, cladding and supporting steel work to be removed.
I have other customers where I do consultancy, get that wrong, and there is almost no limit to the costs.
TBH, I would not entertain it any other way.
Plus, if things go quiet, I can lay myself off & claim dole immediately!
Yes it is an individual decision based on your own work, situation and requirements.
However, I cannot recommend strongly enough to get serious advice on which way to go.
Someone did say that as a sole trader, you can't claim training to expand your area of work, say for example, you decide that you need an EM lighting design course to take up EM lighting design, I was told that as a sole trader, you can't claim the cost of this.
Where as a Ltd. Co. can.
Now I admit this bit is hearsay, so can any sole traders confirm.
I'm not talking about having to do for example a BS7671 update course to keep the qualification you have valid, I'm on about expanding into new areas and the training required for that.
My employer is currently putting me through a teach yourself block laying course for wall building to enhance my skill set, they have paid for all the materials and equipment to... perhaps not IYKWIM.
By examples.
Today, I was working on a production CNC machine tool.
1988 vintage, still worth over £20k on the open market, if available, as it is the lower end of the food chain, similar specified machines of a more popular and reliable nature are still fetching 2-3x this value, so say up to £60k for a 36 year old machine!
If I muck this up and write it off, then the customer can only come after the Ltd. Co. which I could wind up before he does.
If I muck this up and burn his factory down, he has about 40 of these things, and this is one of the cheapest, so a bill of £ "stupid" k, just for the machines without liability for loss of profit, business, employee wages etc.
I have two customers where the buildings were put up around their large machines, so to replace them would need sections of the building roof, cladding and supporting steel work to be removed.
I have other customers where I do consultancy, get that wrong, and there is almost no limit to the costs.
TBH, I would not entertain it any other way.
Plus, if things go quiet, I can lay myself off & claim dole immediately!
Yes it is an individual decision based on your own work, situation and requirements.
However, I cannot recommend strongly enough to get serious advice on which way to go.
Someone did say that as a sole trader, you can't claim training to expand your area of work, say for example, you decide that you need an EM lighting design course to take up EM lighting design, I was told that as a sole trader, you can't claim the cost of this.
Where as a Ltd. Co. can.
Now I admit this bit is hearsay, so can any sole traders confirm.
I'm not talking about having to do for example a BS7671 update course to keep the qualification you have valid, I'm on about expanding into new areas and the training required for that.
My employer is currently putting me through a teach yourself block laying course for wall building to enhance my skill set, they have paid for all the materials and equipment to... perhaps not IYKWIM.
I'm one of "The Ancients" Murdock , after so many years you don't pay anymore . But I only ever paid something like £26 quarter . Have to climb into the loft to verify that .
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Sharpend
"It Just Is"
If you speak to the NI helpline they tell you that you only have to pay in for x Number of years to ensure you have access to a pension etc, beyond those years your payments pay for those that dont contribute!
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Where is proof of that?
I started earning and paying NI aged 16 (start of apprenticeship) I'm now 51. My maths makes that I have paid in for 35 years, so I would like to claim my old codgers exemption as well.
Read this...
https://www.gov.uk/state-pension/eligibility
But the entitlement is changing in a year or so to increase to 35 years. I heard this on the radio within the last week.
If you go back a few years, it used to be 40 years for everyone, but Labour changed it to 30 years because the 40 year rule cost a lot of women a lot of pension money.
I can see this changing to 40 years or full payment for ALL the years you work very soon.
Its a very interesting point. Being SE and a sole trader means you have to pay class 4 on your profits!
https://www.gov.uk/state-pension/eligibility
But the entitlement is changing in a year or so to increase to 35 years. I heard this on the radio within the last week.
If you go back a few years, it used to be 40 years for everyone, but Labour changed it to 30 years because the 40 year rule cost a lot of women a lot of pension money.
I can see this changing to 40 years or full payment for ALL the years you work very soon.
Its a very interesting point. Being SE and a sole trader means you have to pay class 4 on your profits!
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The class 4 NI we pay is a fixed amount each quarter, it seems to bear no relationship to your profit.
Very odd. Mine is calculated at the end of each tax year and is directly related to my profit!
Sharpend
"It Just Is"
If you are registered on government gateway for doing self assessment then you can see the tax and NI calculations on your annual account. Depending if you have made a profit or loss determines whether there is money to paid or returned.?
when I went self employed, wife put child allowance in my name which means NI payments are automatically credited to me - might have changed, and only works if you have kids
I'm wondering if the system is different over the border where Prodave is ? If not he,s being ripped off by HMRC.
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I cannot verify or disprove that point...
But the logic of what you say makes perfect sense to me...
e.g.
Any company purchasing resources for its employees to improve promote or expand the businesses core functions and purpose has got to be a natural expense of the business just as purchasing raw materials to produce a product or service..
Tools, training, transport, communications etc.. etc.. are basic building blocks of a company...
Without it no new employees could ever contribute to a service businesses future growth..
Where as an employee cannot claim such costs just for the betterment of themselves...
It is only the business that has the business objectives..
Anything an employee does without the instruction of the business is just for their own personal betterment to make yourself more saleable within your existing company or to another employer...
Therefore it is a benefit or perk to yourself Not a business cost!!
opcorn
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National insurance is 9% of your earnings. You pay that on all the profit (over the threshold) if a sole trader, you only pay it on your salary as limited , take the rest of your money as dividends.
If you're a sole trader and you make a theoretical profit of £30,000 you are taxed on the full amount - whether that money is really there or just theoretical profit based on work you have not been paid for or a simple revaluation of property or equipment. You are personally liable for that tax.
When limited to pay 20% corporation tax out of the business account. You draw a salary (usually a small one) that is taxed as normal with NI contributions (as appropriate). Lets say you take £10,000 (£833/month). You are left with £20,000 'profit' in the business. If you draw that out as a dividend there is no further tax to pay until you break the higher rate tax threshold. If you decide to leave the money in the business that is no problem.
So (hypothetically) you can earn £10,000 tax free. You are 'earning' £30,000 per year.
Sole trader pays 20% tax on £20,000 = £4,000
Also 9% NI = £1,800
Total TAX = £5,800 paid by the sole trader
Limited company, first £10,000 tax free, the £20,000 dividend is paid by the company and you pay no more tax. There is no national insurance contribution on the dividend. That money is yours to keep - no further tax liability.
If you're a sole trader and you make a theoretical profit of £30,000 you are taxed on the full amount - whether that money is really there or just theoretical profit based on work you have not been paid for or a simple revaluation of property or equipment. You are personally liable for that tax.
When limited to pay 20% corporation tax out of the business account. You draw a salary (usually a small one) that is taxed as normal with NI contributions (as appropriate). Lets say you take £10,000 (£833/month). You are left with £20,000 'profit' in the business. If you draw that out as a dividend there is no further tax to pay until you break the higher rate tax threshold. If you decide to leave the money in the business that is no problem.
So (hypothetically) you can earn £10,000 tax free. You are 'earning' £30,000 per year.
Sole trader pays 20% tax on £20,000 = £4,000
Also 9% NI = £1,800
Total TAX = £5,800 paid by the sole trader
Limited company, first £10,000 tax free, the £20,000 dividend is paid by the company and you pay no more tax. There is no national insurance contribution on the dividend. That money is yours to keep - no further tax liability.
thatb is very similar to how my accountant explained it to me,
he has set how much I am allowed to pay myself, and how much dividend I can pay is up to myself,
he will sort out the difference.
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So long as the business is running in profit. That sounds straightforward, but is vital, especially if you are relying on the dividends to pay your personal bills and you are waiting on some money coming in.
Well, i don't run with any form of overdraft or debt,
But, I don't honestly think my Co will have made much, if any, profit this year, I lost a major contract, but, have just been told I may be given it back again, even though I didn't even ask for it,,,,,
But, I don't honestly think my Co will have made much, if any, profit this year, I lost a major contract, but, have just been told I may be given it back again, even though I didn't even ask for it,,,,,
what about corporation tax on profit??
My Dad was SE for 40 years only in the last few years of his career did he happen upon a decent accountant and do things this ^^^ way :|
doesnt matter what side of the border (unless its the english channel) you are, you will be ripped off
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