Limited Company vs Sole Trader

[Chris at eden]

19 hours ago, monkeybusiness said:

I had a real fall out with my bank (HSBC) when moving house a few years ago. I'd previously gone limited for various reasons, and have always paid myself as little as possible to limit my tax burden. During a meeting with the bank about a possible business loan to buy some machinery (which they granted but I didn't end up bothering with) the bank manager commented that my income would make getting a mortgage difficult (not an issue at the time as I was already sorted in the house I lived in). As I have my personal account as well as current and previous business accounts all with HSBC the manager could see that things were healthy/affordable and suggested I came to see him if ever wanting to get a new mortgage.

Fast forward a couple of years and we decided to move house, and I needed a mortgage for £250k against it. Computer said no on the figures I was paying myself so I went to arrange a meeting with the bank manager - it turned out that particular chap had moved on and I saw someone else. She pretty much laughed in my face when I ran through the figures with her... I asked her how much I needed to pay myself in order to borrow the money - 'It doesn't work like that' was the response.

'OK - forget about my current set up/employment/business. If I get a job tomorrow earning £80k a year, how long do I need to be employed before I am mortgageable for the amount required?' said I.

'3 months' she replied.

'OK - I'll see you in 3 months with my pay slips then'.

'No - it doesn't work like that!!!!'....

'Rrrraaaarrrrrrgggggfghhhhhhhhhhhhh!!!'

In the end Virgin money sorted it through my broker, happy to lend against the company accounts etc (and I didn't have to pay myself any more). But ideally you want to show continuous growth or you can severely limit the lenders willing to look at you. 

That's bizarre.  My mortgage is with HSBC and they assessed it against company profits plus salary.  HSBC are useless though, they closed my business account last December without telling me.  Took me two months to get the money out of them as well.  They told me three times to go into the bank and they would transfer the money to my personal account (which I knew they couldn't), when I got in they wouldn't do it.  The last time in went in the bank manager phoned the call centre and gave them a bit of a roasting.     

[Chris at eden]

18 hours ago, Steve Bullman said:

My own bank wouldn't even give me a mortgage!

 

Ironically my mortgage is with Natwest currently

My business account is with Natwest and it was loads easier to sort than HSBC.  Much better service.  I have bank with HSBC since 1990.  I think J may be onto something.  

[treevolution]

How much profit do you need to to make going limited worthwhile against being a sole trader.

 

 

[Conorjm10]

1 hour ago, treevolution said:

How much profit do you need to to make going limited worthwhile against being a sole trader.

 

 

Good Question!

[benedmonds]

15 hours ago, treevolution said:

How much profit do you need to to make going limited worthwhile against being a sole trader.

 

 

It's difficult to make a straight comparison as there are other benefits from being Ltd.  The separation from personal liability being prime..

 

When we did it (a few... years ago) the additional accountancy costs seemed to be about the same as the tax efficiancy savings.. But we also loaned the business a fair chunk in goodwill..Not sure if that is still allowed. That has also brought down the tax burden.

 

In addition as an employee with a low wage child tax credits can potentially be  claimed.

[eggsarascal]

Running around with new'ish gear and claiming in work benefits, something somewhere is wrong.

[treevolution]

4 hours ago, benedmonds said:

It's difficult to make a straight comparison as there are other benefits from being Ltd.  The separation from personal liability being prime..

 

When we did it (a few... years ago) the additional accountancy costs seemed to be about the same as the tax efficiancy savings.. But we also loaned the business a fair chunk in goodwill..Not sure if that is still allowed. That has also brought down the tax burden.

 

In addition as an employee with a low wage child tax credits can potentially be  claimed.

Thanks for the reply.

When I did my research it seem that there was no real saving once accountancy bills have been taking into consideration.

 

[donnk]

18 hours ago, Conorjm10 said:

Good Question!

not just profit, you can pay family members dividends ( cheaper than inc tax), you can borrow money from the company and not pay tax on it for a while, you can bump the company to clear off a debt and resurect it debt free and go again, lots of little fiddles/advantages.

[Steve Bullman]

8 minutes ago, donnk said:

not just profit, you can pay family members dividends ( cheaper than inc tax), you can borrow money from the company and not pay tax on it for a while, you can bump the company to clear off a debt and resurect it debt free and go again, lots of little fiddles/advantages.

Yep. Its all about having a good accountant, and one who knows limited companies

[Stephen Blair]

6 hours ago, benedmonds said:

It's difficult to make a straight comparison as there are other benefits from being Ltd.  The separation from personal liability being prime..

 

When we did it (a few... years ago) the additional accountancy costs seemed to be about the same as the tax efficiancy savings.. But we also loaned the business a fair chunk in goodwill..Not sure if that is still allowed. That has also brought down the tax burden.

 

In addition as an employee with a low wage child tax credits can potentially be  claimed.

It’s a myth that you are free from liability on a personal level, the the claimants may just keep going until they get money out of someone.  For any reason your ltd company insurance doesn’t pay out and they know you have assets of your own, then it all comes down to who has the best lawyer.  Friend of mine had to pay a lot of money to a lad who got hurt when the LTD company insurance wouldn’t pay out as there was negligence from the employer.  Quite right too imo.