Is a Limited Company the Best Choice for Me?

You might be wondering if a limited company is the best option for you, which is natural. You may have heard all sorts of horror stories regarding what a hassle it is to manage a limited company and you’re not sure whether you’re up to the task.

You might want to take advantage of how tax efficient it is to contract through your own limited company. Accountant after accountant and tax expert after tax expert has told you how much money you could save and you’ve finally convinced yourself it’s time to take home more of all the money you work so hard for instead of giving it to the HMRC for no reason at all.

But you’re still not sure you can handle ALL THAT EXTRA WORK!

Now, it’s time for the truth. Using an umbrella company is simpler. However, it’s not necessarily better. As a matter of fact, using a limited company instead of an umbrella company can net you as much as £15,000 extra per year, based on a daily rate of £350. So, it’s clear the benefits can be substantial.

If you do want to learn more about the pros and cons of working through an umbrella company please visit how Umbrella Company works.

Financial Products

Some people shy away from working as a contractor through a limited company because they think they won’t have the same benefits as if they were working as a permanent employee for someone else. They’re worried about not having insurance or a pension, so they prefer to keep working as an employee, with the related hassle and costs.

As the director of your company, you can enjoy these benefits by setting them up yourself. You can create a company pension scheme to save for retirement and to withdraw profits from your company tax efficiently. There are also quite a few life insurance products available on the market that provide great tax benefits. ATA can help you set up such benefits to maximise their tax efficiency. We’ll advise and guide you in choosing and implementing the best pension scheme and life insurance policy possible, while helping you save money on taxes. We make sure you can have your cake and eat it too.

Withdrawing Company Profits

In the event you will not need your company for the next few years, such as if you intend on retiring, you need to consider how you will withdraw profits from a tax viewpoint. Taking the wrong approach could lead to additional costs and higher taxes, which is why ATA recommends planning to withdraw profits at a rate of 10%. A popular type of planning, it does incur additional costs under the guise of an insolvency practitioner, which is why we will work with you to come up with the best solution for your situation.

Supporting You All the Way

A lot goes into running a business efficiently, capitalizing on tax breaks and staying safe, which is why you’ll need all the support you can get. So, is an accountant who will compile your end-of-year accounts and tax returns enough? Or would it be better if you had access to an accountant, bookkeeper, tax advisor, financial advisor and legal expert? What if you need insurance? What about guidance from an employment status specialist? While availing yourself of such experts’ services will affect your bottom line in the short term, but the results over the long term will be more than worth it.

Mobile Phones

Did you know HM Revenue & Customs allows you to provide an employee with a mobile phone to be used for the business and then claim corporation tax on the cost? What’s more, the mobile phone won’t be considered income as benefit in kind for the employee. Even better, you can use the mobile phone yourself and, as long as you are using it for the business, still enjoy the same benefits. In other words, if you are a contractor with a limited company, you can get a mobile phone from the company and save 40% of the cost, if you are a higher rate taxpayer, of course. The contract has to be in the company’s name and the company has to pay for the contract directly. It’s not enough to add the name of the company to an existing personal contract or invoice.

HMRC also confirmed iPhone and Blackberrys qualify as mobile phones, but specified an employee can only have one unit.

The Staff Party

Did you know you can have a party for your staff every year and claim corporation tax relief on the cost and the staff won’t be charged as if the party were a benefit in kind? And the taxman says you can spend up to £150 (including VAT) per guest to enjoy this tax benefit. So, while you will save 40% on the cost of the party as a higher rate taxpayer, you need to make sure you don’t pay more than £150 per person per tax year. Otherwise, the whole amount will be subject to taxation and not just the excess. So, if you spent £151, the entire £151 will be subject to taxation and not just the additional £1.

As specified, the limit is per person, so you could take your spouse or partner with you and enjoy the tax benefits as long as you don’t go over £300. However, don’t start inviting everyone you know because HMRC will claim it doesn’t qualify as a staff party and you’ll pay tax on everything. The amount of money you’d save using this approach might not seem significant, but at ATA we feel every little bit counts. So, if we can save you even just £1, we will do it because those pounds add up over time. If you were to “hold” a party every year for you and your spouse, you would save £120 in taxes. Over a decade, that’s £1,200. If you put the £120 you save every year into a mutual fund or even a savings account, at a 5% interest rate, you’d turn savings of £3,600 into a little below £8,900. As we said, every little bit counts.