Hey, been lurking in the forums these past few days trying to figure out my options.
Basically, I've been offered some IT contract work for the next few months. I'm just coming out of uni so have no other earnings this financial year and total will be under any NI thresholds (full or proportional to the amount of time remaining in the year). Not sure if will get a job or stick to contracting afterwards.
1. How do you pay yourself a salary as a director? for dividends you need a directors meeting with minutes and a dividend voucher, but if I just want to pay myself an amount as salary do I need to record that as a decision anywhere or do I just enter the amount I want to take out in PAYE software? Don't care about tax here, just the actual procedure.
2. Are the hmrc's free paye tools adequate for my situation?
3. Are there any drawbacks to the free starling business bank account in my situation? I don't deal with cash and have no foreign transactions.
4. Do I need bookeeping beyond the bank account transaction history and PAYE software? As in, do I need to keep an ongoing P&L / Balance sheet, director's loan accounts (even if I don't use them)?
5. If at the end of the year I only pay myself 5k through the company, and company bank account is empty at the end of the year, is my P&L just going to be 5k in 5k out, balance sheet of 0 in a format I can lift off any other company on Companies house?
6. Say come January I've stuck to contracting and made above the income tax lower threshold. How much will it cost to get an accountant to check over everything then compared to getting one now?
Hope most of my qs are new, couldn't find exact answers while searching and my situation is a bit unusual.
Hi
This is a forum for professional bookkeepers and accountants not for business owners.
Tax planning is key, planning being the key word, getting advice before you do anything, including before incorporating.
Whilst you think at this stage you cannot afford an Accountant, you cannot actually afford not to have one.
The reason you cannot find answers to all your questions is because tax advice is specific to your circumstances, hence why we cannot help you on here for one, mainly because we are in this business to make money ourselves.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
this site isn't really for business owners but you're straight out of Uni so lets add a bit of flexibility for you.
For IT contract work you may be caught under something called IR35 which effectively prevents payment in dividends.
The only reason for dividends is to reduce national insurance. But remember also, even if you could pay dividends. They are not always better than PAYE. For example, PAYE is an expense where dividends are paid out of taxed profits so if you paid dividends you would pay tax even though you are under the tax threshold.
It sounds as though you have already considered many of the things that you need to . Remember that you are an employer and will need to register as such in order to process your payroll. In general people file monthly but there is an option to file annually.
Your idea of the accounts and your responsibility as a director is too simplistic. You are looking at the company as a payment engine rather than realising that becoming the director of a company creates similar legal obligations that a parent has for its child. Even though you are running a company it has a life of it's own and you are it's gaurdian.
There is a legal requirement to keep adequate books and records that may be examined at any time.
You are talking about company income as though personal income by assoicating your tax threshold to the company. You need to consider the companies taxes and your own completely seperately.
It is better to get an accountant on board from the start rather than later when you may have already cost yourself more than the accountant would have cost you.
As for how much an accountant would cost. It would not generally cost you any more than £1500 and generally a lot less. I would not expect it to cost less than £600 though. Thats a wide range I know and you need to make the trade off between cost and how confident you are that the accountant understands you and your business. Don't go for the cheapest, go for the best that you can afford (which is often not the most expensive).
I've not answered your questions as such as I think that whilst you are on the right lines there are some fundamental issues in your thinking so I've started the ball rolling with a generalised reply rather than specifics.
All the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
we crossed in the post. I was being a little kinder to this one as they are still fresh out of Uni so although not answering their questions as such still giving them enough to help them reach that epiphany that when it comes to acccounts it's best left to the professionals.
One thing that some of mine were concerned with was my payment. My approach is generally monthly payments then a balancing adjustment on accounts production and before filing.
Some larger practices would only bill on accounts signing or end of first quearter so people will be doing stuff correctly from the get go but not have to part with serious money until they are in a better position to make payment.
All the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
2. Are the hmrc's free paye tools adequate for my situation? If you don't need payslips it's fine, but it's very basic.
3. Are there any drawbacks to the free starling business bank account in my situation? I don't deal with cash and have no foreign transactions. It's a great business bank account and two of my client's use it. Only one drawback I can think of is that you can't use the card at pay at the pump.
6. Say come January I've stuck to contracting and made above the income tax lower threshold. How much will it cost to get an accountant to check over everything then compared to getting one now. Shaun's advice is crucial here, as is Joanne's, get one on board before you start, it won't be much different as the main cost is doing the year end accounts and tax return. You won't need to pay a lump sum, most accountants will let you pay monthly. If you wait til the end of your financial year you will have an upfront cost to pay to finalise the accounts and do the tax return. Unless you know what you're doing, don't attempt to do the year end accounts and tax return yourself. It isn't straightforward and people often come unstuck.
-- Edited by Leger on Monday 5th of August 2019 09:15:04 AM
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
2. Are the hmrc's free paye tools adequate for my situation? If you don't need payslips it's fine, but it's very basic.
3. Are there any drawbacks to the free starling business bank account in my situation? I don't deal with cash and have no foreign transactions. It's a great business bank account and two of my client's use it. Only one drawback I can think of is that you can't use the card at pay at the pump.
6. Say come January I've stuck to contracting and made above the income tax lower threshold. How much will it cost to get an accountant to check over everything then compared to getting one now? Joanne's advice is crucial here, get one on board before you start, it won't be much different as the main cost is doing the year end accounts and tax return. You won't need to pay a lump sum, most accountants will let you pay monthly. If you wait til the end of your financial year you will have an upfront cost to pay to finalise the accounts and do the tax return. Unless you know what you're doing, don't attempt to do the year end accounts and tax return yourself. It isn't straightforward and people often come unstuck.
Thanks John
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
No probs John, my response was said tongue in cheek but I just read it this morning and thought "that doesn't come accross as I intended it".
Joanne and myself were both saying the same thing completely independantly and in different ways anyway.
Happy Monday matey
all the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Joanne and myself were both saying the same thing completely independantly and in different ways anyway.
All no doubt pointlessly said and ignored. Of course you can just get free advice from lots of places, trouble is he wont know if its right or wrong advice until HMRC come knocking for fines and penalties.
But OP FL hasnt bothered to log back in, no doubt has read it but no ack. Shame as I wanted some free IT work doing.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
