LTD company directors and CV19 financial help
Discussion
Just watching an interview on the local bbc news prog which was with a woman from London that said that both her and her husband were directors of their own one man band companies.
Both pay themselves the ‘standard director level’ annual pay of £8000 per annum. She vehementally claims millions of ‘directors’ do exactly this. And therefore would receive virtually nothing from the government in financial help. She said she was a professional photographer and also a property developer I Think it was.
She was complaining that there was no financial help for people like her and her husband and that the money was ‘running out’ and she had no savings.
She however was being interviewed from what looked like a very well to do property, and mentioned that they had to contact their daughters private school to say they couldn’t continue to pay fees (rolled out the pertinent fact that daughter had severe dyslexia or some such).
So is it fact that directors of one man band companies have to only receive £8000 per annum from their company or is just a perpetual ruse to minimise contributions to the HMRC? Do all sole trader directors do this or is it very much a choice that some now regret?
She looked absolutely desperate and I’m glad not to be in her position. But is it by choice through financial advise or not?
Am I being uncharitable in thinking their tax planing has backfired? That taxation on dividends was a good thing for them in years gone by but maybe not so much anymore......
Both pay themselves the ‘standard director level’ annual pay of £8000 per annum. She vehementally claims millions of ‘directors’ do exactly this. And therefore would receive virtually nothing from the government in financial help. She said she was a professional photographer and also a property developer I Think it was.
She was complaining that there was no financial help for people like her and her husband and that the money was ‘running out’ and she had no savings.
She however was being interviewed from what looked like a very well to do property, and mentioned that they had to contact their daughters private school to say they couldn’t continue to pay fees (rolled out the pertinent fact that daughter had severe dyslexia or some such).
So is it fact that directors of one man band companies have to only receive £8000 per annum from their company or is just a perpetual ruse to minimise contributions to the HMRC? Do all sole trader directors do this or is it very much a choice that some now regret?
She looked absolutely desperate and I’m glad not to be in her position. But is it by choice through financial advise or not?
Am I being uncharitable in thinking their tax planing has backfired? That taxation on dividends was a good thing for them in years gone by but maybe not so much anymore......
The remainder of their pay is made up of dividends. The first £2000 of dividend is tax free , after that they are taxed at 32.5 percent. Dividends are not wages though, they are not paid via PAYE. The quoted 8k per annum is paid PAYE, nothing else.
If you've a husband and wife they may stick them both on as directors to maximize the takings out the company depending on what the other takes home already etc.
I was a contractor /one man band and my accountancy company were the biggest contractor accountant firm in the UK. The above is in like with the advice they gave me . From that you can make your own determination as to how wide spread that structure might be.
If you've a husband and wife they may stick them both on as directors to maximize the takings out the company depending on what the other takes home already etc.
I was a contractor /one man band and my accountancy company were the biggest contractor accountant firm in the UK. The above is in like with the advice they gave me . From that you can make your own determination as to how wide spread that structure might be.
fesuvious said:
It's a wise and sensible way for a shareholder performing a role for/within a LTD to arrange their affairs.
It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
But you've got to admit, in respect to the current situation, it's still really funny though innit.It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
fesuvious said:
It's a wise and sensible way for a shareholder performing a role for/within a LTD to arrange their affairs.
It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
But isn't that the point that's being made? The above arrangements were designed to reduce the overall tax bill. The feeling is that there's some sort of retribution at hand against those who had choices.It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
I don't participate in that green eyed school of thought, but can easily see why "can't have your cake & eat it" thoughts abound.
mike74 said:
fesuvious said:
It's a wise and sensible way for a shareholder performing a role for/within a LTD to arrange their affairs.
It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
But you've got to admit, in respect to the current situation, it's still really funny though innit.It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
2 sMoKiN bArReLs said:
But isn't that the point that's being made? The above arrangements were designed to reduce the overall tax bill. The feeling is that there's some sort of retribution at hand against those who had choices.
I don't participate in that green eyed school of thought, but can easily see why "can't have your cake & eat it" thoughts abound.
Indeed.I don't participate in that green eyed school of thought, but can easily see why "can't have your cake & eat it" thoughts abound.
The other problem with including dividends as income is “where do you stop”? For example and elderly couple whose retirement income is made up of £20k dividends which have now gone down to zero - should the Govt. step in and reimburse them as well? What about somebody who relies on BTLs for their sole income? There are lots of different “unique” situations.
monkfish1 said:
mike74 said:
fesuvious said:
It's a wise and sensible way for a shareholder performing a role for/within a LTD to arrange their affairs.
It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
But you've got to admit, in respect to the current situation, it's still really funny though innit.It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
The fact is operating through a ltd is not solely driven by tax advantages (particularly these days seeing as they’re negligible). If you want financial/liability separation then it’s necessary, albeit arguably a LLP structure is now an option, although a recent addition.
The other factor is for many operating a ltd, clients simply wouldn’t do business with you or allow you to tender if you were Fred Jones self employed fella and didn’t have a companies registration number, VAT registration etc. It looks amateur.
Ho hum, if it gives the green eyed something to laugh about in these bad times, then at least it raises a smile to some at others expense. Always a pleasant trait.
fesuvious said:
It's a wise and sensible way for a shareholder performing a role for/within a LTD to arrange their affairs.
It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
Whilst I agree with you my personal opinion is never to run a lifestyle that outstrips your ability to pay for it . There's a market cap on what I could earn if I worked for a company as an employee. My lifestyle costs are pinned to it. When I went contract via LTD company , my company income over this was saved, as working this way was insecure, I needed the money to cover periods of time off or if I had to go back to being an employee somewhere, I couldn't have costs that significantly outweighed my earnings. It isn't new, it's not a dodge.
They take a basic salary, rest of income via dividends. Dividends can only be paid out of profits.
Some of the less well informed / perpetually angry ought remove head from colon. This lady will not be able to draw divis, as making no profit. Moreover can only draw salary if her company has the money in an account to draw. If it doesn't or runs out, tough.
Her point is that those operating like this have deliberately been passed over for assistance beyond the basic salary.
The arrangement is something normal, and has been for many, many, many years.
I worked shoulder to shoulder with many a contractor via ltd who spent the money they had like the good times would last forever. I don't judge them for it, but find it difficult to agree to an argument that they should be further supported beyond what they paid PAYE, just like sole trader or partnership should be supported under the same terms (PAYE).
Edited by deebs on Wednesday 8th April 20:48
fesuvious said:
Some of the less well informed / perpetually angry ought remove head from colon.
What's the need for this? Bitter for some reason? No one so far has demonstrated being ill-informed, other then the OP who is trying to become informed.You also failed to mention that it's also wise and sensible to maintain at least some buffer within a company as well as some savings so a mere month doesn't leave people pleading poverty.
TTmonkey said:
Just watching an interview on the local bbc news prog which was with a woman from London that said that both her and her husband were directors of their own one man band companies. .
Bear in mind that they may be lying through their teeth and have a business bank account stuffed full of readies. Most likely peeved that they won’t get a free 2.5k each per month from the JRS. The school fees stuff was probably there to give the story an emotive edge, although I doubt it’ll wash with many out there.This could be a case of the contractor scum being jealous of the permies...never thought I’d see the day?
Incidentally, I got a pay rise today. The account advised that my salary has now gone up from £719 to £734 per month. So it’s not all bad news here in Ltd Co-land.
The woman looked suicidally desperate to be fair. Whatever the previous advantage for them both (individually) running their affairs like this seems to have left them in a desperate state.
But saying that, she did look like they had (still had, but unable to see how to maintain it) previously had a very very comfortable lifestyle. I guess it crumbles very quickly.
Unprecedented times whatever sector you are in.
But saying that, she did look like they had (still had, but unable to see how to maintain it) previously had a very very comfortable lifestyle. I guess it crumbles very quickly.
Unprecedented times whatever sector you are in.
Buffer within the company?
A lot of company owners struggle to take a wage let alone have a bloody buffer.
It's amusing how the minority who seem to think this is funny, fail to understand that if companies were not run in a tax efficient way, there would be less money to pay thier wages or to even employe them in the 1st place.
Also it's a good job somebody got up off thier arse and took a big risk to create employment for people like Mike.
A lot of company owners struggle to take a wage let alone have a bloody buffer.
It's amusing how the minority who seem to think this is funny, fail to understand that if companies were not run in a tax efficient way, there would be less money to pay thier wages or to even employe them in the 1st place.
Also it's a good job somebody got up off thier arse and took a big risk to create employment for people like Mike.
Powerfully Built PSC Director - Outside IR35 said:
This could be a case of the contractor scum being jealous of the permies...never thought I’d see the day?
This is the other misconception I am witnessing in all this debacle; all directors of ltd's are contractors sat next to their permie brethren. Whilst that may account for a percentage, its certainly not all. I didn't set up a ltd to do the same thing I did when PAYE, I did it to (try to) develop a business. By the sound of the couple on the TV, they didn't set up a company to do contracting work, but to try and create a business. One of the pleasures of the UK was that it provided little red tape to allow people to do so, albeit that might well change going forward and one now expects and tax advantages to swing the other way when you take into account the changes in the last 5 or so years with regards to dividend tax, entrepreneurs relief etc. In the contractor world for years permies have grumbled about inequality next to a contractor. Taking into account holiday pay, sick pay, pension contribution, accountancy fees etc, the contrast might reduce. Ultimately, however, the permies could have always taken the leap themselves.
TTmonkey said:
The woman looked suicidally desperate to be fair. Whatever the previous advantage for them both (individually) running their affairs like this seems to have left them in a desperate state.
But saying that, she did look like they had (still had, but unable to see how to maintain it) previously had a very very comfortable lifestyle. I guess it crumbles very quickly.
Unprecedented times whatever sector you are in.
This is it really. People are or soon will be hurting. There's no pleasure in hearing your friends have been furloughed and are worried about their company's future prospects. Nothing fun about your brothers self employed business dropping off a cliff. No laughs to be had in your mother in law applying for universal credit as her casual work has ended with 24hrs notice. But saying that, she did look like they had (still had, but unable to see how to maintain it) previously had a very very comfortable lifestyle. I guess it crumbles very quickly.
Unprecedented times whatever sector you are in.
The tax payer cannot support so many and certainly not for very long. Some very difficult decisions ahead for our elected representatives. War time leadership required.
TTmonkey said:
I also said in my original post that she was ‘complaining’ that they wouldn’t get financial help. Wrong words, she was desperately pointing out rather than complaining.
I quite like Rishi (plus I am a Southampton'er too, so I kind of have to!), but I can see the electorate will largely be unsympathetic to directors of ltd companies (and in some cases, find it "funny" they will go bankrupt). To that end, in the same way as taxes on owners of BTL's, there is little by way of pressure on the chancellor to extend Boris' arms around everyone to include directors. Highlighting it, whilst honourable, is probably therefore very much in vain.
I had many friends of mine think I am "covered" by the scheme for the self-employed. That to me just supports the fact its very much about semantics of how you set up your self-employment. If you did it through a ltd, for whatever reason, you have no recourse for help. If you didn't, for whatever reason, you will get support. Likewise, the cash in hand sole trader that stuck £20k in notes in their mattress and declared income of £45k will get support, the honest sole trader who put the £65k through the business won't. There are a few people I know who couldn't be arsed setting up a business properly, nor willing to spend on incorporation costs and the associated fees, so just transferred income from self-employed work directly to their personal bank account. They are now of course benefiting from the government support.
As I say, the manner in which someone establishes themselves in business, whether through a ltd, sole trader, LLP or otherwise, is a matter really of semantics to a degree, albeit one format might be more appropriate than another at any one time for a variety of reasons. If you are thorough about starting up a business, chances are you will seek advice on the form and I suspect the majority seek advice from an accountant, who, again in the majority of times, will suggest a ltd. The difference is that the other forms of business set up are now covered by the CV support structure, other than the ltd directors. In addition to standing out in that corridor, they are also seemingly being vilified to a degree in this or those to be laughed at. Whilst the sole trader next door, who could have been operating in the same field, doing the same job, earning the same money, is sat among the rest of the population (probably staying quiet and breathing sighs of relief).
deebs said:
The remainder of their pay is made up of dividends. The first £2000 of dividend is tax free , after that they are taxed at 32.5 percent. Dividends are not wages though, they are not paid via PAYE. The quoted 8k per annum is paid PAYE, nothing else.
If you've a husband and wife they may stick them both on as directors to maximize the takings out the company depending on what the other takes home already etc.
I was a contractor /one man band and my accountancy company were the biggest contractor accountant firm in the UK. The above is in like with the advice they gave me . From that you can make your own determination as to how wide spread that structure might be.
Not entirely true. If you've a husband and wife they may stick them both on as directors to maximize the takings out the company depending on what the other takes home already etc.
I was a contractor /one man band and my accountancy company were the biggest contractor accountant firm in the UK. The above is in like with the advice they gave me . From that you can make your own determination as to how wide spread that structure might be.
Assuming the 8k salary (and no other income), then the first £2k dividends are tax free and the next £40k are taxed at 7.5%.
32.5% is taxed on any higher rate amount and 38.1% for any additional rate amount of dividends,
Always remember that the company also pays 19% corporation tax before any dividends are paid out.
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