in nova’s defence they were pretty much forced into this by the government and the changes to legislation too.
Thanks, Conor. Last time I was directly involved in this was some 9 years ago, and things have apparently changed a bit since then. In essence then, the “advantage” of going Ltd is that the “employer” is prepared to pay a higher rate (due to no “employment costs” such as Employer NI, holiday pay, sickness pay etc) and you also benefit if you are a higher rate taxpayer.
I put the basic figures in for a £26k gross income and yes, the net pay came out the same. It is now all about the allowable expenses etc (unless, as you say, you are a higher rate taxpayer)
Conor:
Roymondo:
, and Dividend income is also taxed at a lower rate than normal Income Tax.Again, no it isn’t. Dividends are paid out of POST TAX profits so they’re paid out of money that has already had 20% tax on it. That is why there’s a rebate given so Ltd Company post tax profits don’t end up being double taxed.
Dividend calculator…
itcontracting.com/calculator … r-2013-14/
Pop an 8k salary into that, then add 10k of dividends and see how it looks?
Dividends end up paying 10% tax, not 20% ?
Dividends are paid out on POST TAX PROFITS. That is earnings which have already been taxed. So if you earn £20,000 as a limited company and with no other expenses draw £10,000 as a wage it makes £10,000 profit. This £10,000 is taxed at the corporation rate of 20% leaving £8000 remaining. Dividends are paid out of this £8000 which is really £10,000 less corporation tax. So excluding NI, the amount you’re left with out of £20,000 after income tax if it were PAYE or corporation tax has been applied if you are paid £10k as a wage is the same, £18,000.
You as an individual then pay 10% dividend tax. You then get a tax credit of 1/9th of the dividend effectively cancelling it. If you’re a basic rate payer the tax credit is automatically applied.
So…If I’m understanding this correctly:-
Being Ltd leaves you slightly worse off when grossing under £20k
Leaves you about the same for £20k-£26k
Leaves you slightly better off £26-£41865 (higher rate threshold)
Leaves you better off once into higher rate tax - IF you claim back all the mickey mouse offsets that people at this end of income seem to get, but the rest of us don’t.
So in conclusion: - If the job is £26k basic with the possibility of going upto £42k on overtime - you are better off as Ltd…
Umbrella might work for those on over £42k… (anyone?) BBC and Westminster people would be the prime examples of those that do benefit from umbrella… But in the transport industry?
PAYE works for those on under £26k, meaning agency work being irregular is likely to fall into this category as well.
Since the number of hours a driver can work has legal limits - The hourly rate is going to be everything isn’t it?
Working 60 hours a week for £8.50ph as self-employed just isn’t going to work - ever. Pushes legal hours to the limit, only barely makes £26k…
40 hours at £12.75ph SE on the other hand - would just about work. It’s the same wage, just legal this time, with no half-asleep drivers fiddling their tachos to get the extra hours in that they should not be working just to get the same wage as deemed “optimum” here.
Any gain on the self-employed hourly rate beyond £12.75 of course is all good… Just don’t go below that, because you’re mugging yourself. 
Winseer, work this one out
£12 an hour for the first 8 hours
£18 Overtime, Sat and Sunday rate
Hardly unbelievable for SE LTD Rates.
5 days at about 12 hours
5x8x12=480
20x18=360
= 840.00
- VAT @20% = 168
Total = 1008
Say £100 in weekly expenses claim to come off the total
VAT Flat Rate = 100.80
Corporation Tax on £807.20 @ 20% - 134.54
So on a £1008 Invoice total works out at £772.66
Then the accountant does some magic with “Directors Loan account” and that is an impressive take home pay, when compared to PAYE
PAYE Example; (Less per hour)
£10 an hour for the first 8 hours
£15 Overtime, Sat and Sunday rate
5 days at about 12 hours
£400 Std Rate
£300 OT Rate
Take Home £532.82
So it works out at £239.84 better than PAYE every week
Earnings Summary Yearly Monthly
Gross Pay £36,400.00 £3,033.33 £700.00
Tax Free Allowances £10,000.00 £833.33 £192.31
Total Taxable £26,400.00 £2,200.00 £507.69
Tax Due £5,280.00 £440.00 £101.54
National Insurance £3,413.28 £284.44 £65.64
Total Deductions £8,693.28 £724.44 £167.18
Net Earnings £27,706.72 £2,308.89 £532.82
Yes. the £840 a week gross would amount to around that optimum £42k figure. Perhaps the top end of truck driving today.
I agree you’d be a lot better on Ltd if you were earning this much gross. This is what Ltd is made for clearly.
Now… Where’s the yard at that would let their drivers invoice for that no quibble 
. 
trubster:
Winseer, work this one outThen the accountant does some magic with “Directors Loan account” and that is an impressive take home pay, when compared to PAYE
PAYE Example; (Less per hour)
£10 an hour for the first 8 hours
£15 Overtime, Sat and Sunday rate5 days at about 12 hours
£400 Std Rate
£300 OT RateTake Home £532.82
So it works out at £239.84 better than PAYE every week
No it doesn’t. Seeing as you were taking everything into account with Ltd, be fair and do the same with PAYE eh? For a start there’s an additional 10.7% in holiday pay for the driver on PAYE. Then there’s the tax you’d get back for meal allowances and if you had a uniform they provided and you washed, one for that as well. Depending on the size of the business there may also be a compulsory employers pension.
Ive just spoken to an agency to top up my starting business.
I said the lowest I would take off them would be £14ph first 8 then £21 over and above. They didnt tell me to ■■■■ off, just that they needed to speak to the owner/manager but he wasnt in and they will phone me. Ive worked for these before and they know I can do the job and that I have everything that they need.
Possibly got a small contract for a couple of weeks @ £15ph then £20ph over and above, driving a tipper for a few weeks.
A lot of the companies I have spoken to already have said they would not hire me if I wasnt Ltd and VAT registered. In their eyes being Ltd makes you seem more professional, rather than a rogue out to make a few quid.
Conor:
trubster:
Winseer, work this one outThen the accountant does some magic with “Directors Loan account” and that is an impressive take home pay, when compared to PAYE
PAYE Example; (Less per hour)
£10 an hour for the first 8 hours
£15 Overtime, Sat and Sunday rate5 days at about 12 hours
£400 Std Rate
£300 OT RateTake Home £532.82
So it works out at £239.84 better than PAYE every week
No it doesn’t. Seeing as you were taking everything into account with Ltd, be fair and do the same with PAYE eh? For a start there’s an additional 10.7% in holiday pay for the driver on PAYE. Then there’s the tax you’d get back for meal allowances and if you had a uniform they provided and you washed, one for that as well. Depending on the size of the business there may also be a compulsory employers pension.
Sorry, I do apologise, these were quick top of the head calculations. So we were at 772.66 LTD and 532.82 PAYE
You get 4 weeks holiday pay by law, so that works out at £532.82 x 4 (2131.28)
Over 12 months (52 weeks) you would be at £27706.64 Take home on PAYE - this includes your holiday pay
Over 12 months you would be at £40178.32 for working 52 weeks, so take 4 weeks off as you wouldn’t be paid holiday, that makes it £37087.68
So over 12 months, Mr LTD is £9381.04 better off*
*Obviously I haven’t taken into account the all important “Laundry allowance and meal allowances” but I am sure it doesn’t equate to £9000
Winseer:
Now… Where’s the yard at that would let their drivers invoice for that no quibble
That would be a trade secret 
But of course, Nobody has ever invoiced 1000 a week have they? 
A quick question - can we avoid paying taxes on dividends? Take home as much as possible
have drivers regular who invoice over or around the £1k mark. it is possible.
nova were forced to remove the old style dividend accounts when HMRC changed the laws/clamped down (I did post something about it which whilst in depth was exactly why it was changed).
but hey ho am off now to sit back and watch another 3 pages of … ltd is better…I prefer nova fastpay jsa etc…and the good old but what about your holiday pay brigade.
in my own experiences both as a driver and in recruitment I would estimate (and I was one of them) at least 80% of drivers will register with several agencies (nothing wrong with that gives an option if one goes quiet). most forget about holidays at agency 2 and 3 and most wont pay it if you don’t ask. I also tend to notice drivers will take or do a 4 day week if they want a break rather than book full weeks. most will only take a 2 week break for summer hols etc.
for me I would rather the extra cash in my pocket than being in a holiday pot.
trubster:
You get 4 weeks holiday pay by law, so that works out at £532.82 x 4 (2131.28)
No you don’t. You get 5.6 weeks by law.
At least there was one thing about the rest of your calculations. You now know how much money you need to put away for when the whole house of cards comes falling down.
Wilk:
A quick question - can we avoid paying taxes on dividends? Take home as much as possible
You don’t need to. There is a tax credit automatically applied to dividends which is basically equal to the 10% you pay as a basic rate tax payer. Dividends however as I’ve repeatedly said, are taken out of the Ltd company profit after corporation tax. There is absolutely no way to avoid that. You could move your company to another country in the EU which has a lower rate of corporation tax if you wanted. Ireland is 12.5%.