New year Changes for the new year

[ballandco]

What changes are you making next year ?i feel this year made a mistake booking work up to far in advance mainly bathrooms then missing the first couple of months of the heating season where I earn my bread . So going to try and focus on heating boilers installs etc next year and try to cut back on the plumbing ,does anyone else just do heating ?is it proper dead in the summer ?
also having to go vat registered this year ,does anyone find this a big turn off for domestic work or do they except it as the normal,don't think it will matter to my regular customers just worried about new ones

 

[rocketmanbkk]

I'm going to charge correctly and not do jobs as favours for people I've never met. Gotta toughen up or I'll go pop. Not that bad but need to earn.

 

[quality]

I only do heating, gas and heat pumps. I hate bathrooms with a passion lol

 

[ballandco]

I no what you mean bathrooms are a nightmare ,take to long and don't seem to earn any money .
quality do you do many heat pumps?wouldnt mind training for some renewables next year
rocketman I no what your talking about as we'll I'm the same ,always think in the long run rather than here and now .so many times I do a favour and think that's all rite there use me again to find no phone call anytime soon .

 

[cr0ft]

I'm going to charge correctly and not do jobs as favours for people I've never met. Gotta toughen up or I'll go pop. Not that bad but need to earn.

Just done my accounts for the 2012/13 year and have earnt more money by charging more and working less hours. Your idea is the way to go matey!

 

[quality]

I no what you mean bathrooms are a nightmare ,take to long and don't seem to earn any money .
quality do you do many heat pumps?wouldnt mind training for some renewables next year
rocketman I no what your talking about as we'll I'm the same ,always think in the long run rather than here and now .so many times I do a favour and think that's all rite there use me again to find no phone call anytime soon .

fitted 15 heat pumps this year, I never thought it but the demand is there and it just keeps increasing year after year.

 

[cr0ft]

What changes are you making next year ?i feel this year made a mistake booking work up to far in advance mainly bathrooms then missing the first couple of months of the heating season where I earn my bread . So going to try and focus on heating boilers installs etc next year and try to cut back on the plumbing ,does anyone else just do heating ?is it proper dead in the summer ?
also having to go vat registered this year ,does anyone find this a big turn off for domestic work or do they except it as the normal,don't think it will matter to my regular customers just worried about new ones

It's a big turn off for cheapskate domestic customers tbh. The ones you wouldn't want anyway imo.

In my experience most people expect to pay VAT on a plumbers bill.

 

[ballandco]

Sounds good cant be running round all year with not a lot to show for it, be handy to get rid of the penny watching customers as well to many of them ain't good for no ones health lol
quality that surprises me might have to do a couple of courses and see what's what

 

[Ermintrude]

As said above you loose the idiots who want a cash "discount"

 

[Leo21]

I only do gas and heating and I keep quite busy all year round. Forward thinking customers have heating done when it's not cold! And there's always servicing.

 

[TomLane]

Why would you wait till New Year to make a change? If something in the business needed changing surely it would make sense to change it ASAP?!

Never really understood the whole New Year resolution thing myself personally!

Each to their own I suppose!

I understand making a change after doing year end accounts in April once you have an indication of the finances from that year or previous though.

 

[ballandco]

Probably as finally had some time to chill out and think about things after being manik all year and finally sorting out books ,plus im not going back to the new year
i agree if I though of this in the summer I would of changed it then though

 

[mfgs]

I am looking to take on an apprentice in the new year, which I am a little dubious about. But I also think it is the only way to get someone to work how I want them to work, by training them from scratch. Most subbys I use don't really fit how I want my company portrayed and I need to change this as I am getting busier and have been using more of them.

 

[mfgs]

I am also debating whether to become a limited company and go VAT registered as well.

 

[Ermintrude]

I am also debating whether to become a limited company and go VAT registered as well.

Apprentices are a nightmare for first few months then it actually is helpful. Don't leave them on the side line. Balls deep from day 1.

Ltd company is pointless unless your doing it for tax reasons. You will find it much more difficult to get credit, overdrafts and people you are submitting tenders to will search you at companies house. You may have been an extremely successful self employed person but when your ltd company only been going for two weeks your credit checks come back like your a complete newby! Doesn't bode well when tendering for big jobs pqs will instantly discount you.

And what benifit is it in the domestic market? Only thing I can see is if you earn over 130k and want to manage your tax liability?

 

[mfgs]

I am not one to have people just passing tools, the first couple of weeks they will be watching and learning the names of everything etc. Then they will be shown how to do things and left to do it until they get it right, I know it is going to be difficult at first but I will hopefully see the benefit in 6 months to a year.

Interesting what you say about the Ltd company thing, to be honest I haven't looked into it much. It is on my list of things to read up on over the next week or so.

 

[Leo21]

I am not one to have people just passing tools, the first couple of weeks they will be watching and learning the names of everything etc. Then they will be shown how to do things and left to do it until they get it right, I know it is going to be difficult at first but I will hopefully see the benefit in 6 months to a year.

Interesting what you say about the Ltd company thing, to be honest I haven't looked into it much. It is on my list of things to read up on over the next week or so.

They did tax breaks on ltd companies a while back, so I had one for a while. Very comiplicated and best left to proper business types.

 

[cr0ft]

Apprentices are a nightmare for first few months then it actually is helpful. Don't leave them on the side line. Balls deep from day 1.

Ltd company is pointless unless your doing it for tax reasons. You will find it much more difficult to get credit, overdrafts and people you are submitting tenders to will search you at companies house. You may have been an extremely successful self employed person but when your ltd company only been going for two weeks your credit checks come back like your a complete newby! Doesn't bode well when tendering for big jobs pqs will instantly discount you.

And what benifit is it in the domestic market? Only thing I can see is if you earn over 130k and want to manage your tax liability?

I agree with the apprentice thing but not sure I agree with the summary of the limited company option. Unless I'm missing something you save a lot of personal tax on how much you pay yourself. I can't be bothered to do the exact figures but basically anything you pay yourself isn't taxed at more than 10% with a limited company versus (I think) it's 20% if you are self employed, 40% if you make more than 40k a year in profit. A limited company pays a flat rate of 20% on all profits.

Limited companies are a much better option for reducing the tax you pay out unless your business is earning very little profit, but the downside is there's a bit more paperwork etc involved. In practise, about 1 day a year of accounts which I tend to do over Xmas when I'm off anyway.

Feel free to correct any of this, it's just how I see the situation.

 

[Leo21]

You also have to gave a company secretary and I think but not sure a chairman. You pay yourself in dividends and you can't just pull money out will nilly. You have to go through your company secretary or chairman.

 

[julesverne]

my brother and myself were discusssing about going ltd but i never took it any further,but he says as a ltd company he says you can pay yourself a tax free dividends upto 36 grand on each tax year and pay yourself min wage throughout the year to limit your tax liability. not sure if that true but my brother and sister in law are well clued on tax affairs etc so i assume this is correct.

 

[Ray Stafford]

Also on the limited company side, don't be surprised if your merchant suddenly cuts your credit limit, or asks for a personal guarantee.

Going from dealing with a sole trader (all personal assets underpin the debt) to dealing with a limited company (might just be £1 of share capital underpinning the debt) makes merchants very nervous.

 

[Nostrum]

Most people I speak to just wanted to do it for the title / kudos which in reality doesn't make much difference these days if you ask me, a lot of lite companies don't even advertise it anymore.

As said, until the company (as it becomes an entity in itself) has a good credit rating you'll be asked for a personal guarantor by most. It's normally recommended by accountants if your profit is 25k + and that's probably so you have to pay them to do another set of books a year.

 

[woodsy]

Went ltd this year on the advice of my new accountant. In terms of bookkeeping nothing has altered really but he claimed it would half my tax bill - the proof will be in the pudding at the end of March when I submit my accounts.

 

[cr0ft]

Most people I speak to just wanted to do it for the title / kudos which in reality doesn't make much difference these days if you ask me, a lot of lite companies don't even advertise it anymore.

As said, until the company (as it becomes an entity in itself) has a good credit rating you'll be asked for a personal guarantor by most. It's normally recommended by accountants if your profit is 25k + and that's probably so you have to pay them to do another set of books a year.

The loan thing I think depends on whether it's secured or unsecured. I had no problems getting a £12k loan as my first loan after 2 years of trading but I've no experience of buying a product on finance when starting up. The loan was a van loan with VW finance and no guarantor was needed. Of course if I didn't pay they would just take the van back so I guess it would be much harder getting a bank loan or something.

I know that certain loan agreements make the director personally liable for the repayments if the company folds. My van finance loan did.

For me, more than anything, I like having my company's and our personal finances completely separate. All of the tax rates are on HMRC's website. All I know is that in my case the difference is thousands of pounds each year, that is I am thousands of pounds better off as a limited company than a sole trader. Am doing last year's accounts today which is for when I moved to a new area and started again really so I will let people know how the 2 compare once I've done them.

 

[cr0ft]

Also on the limited company side, don't be surprised if your merchant suddenly cuts your credit limit, or asks for a personal guarantee.

Going from dealing with a sole trader (all personal assets underpin the debt) to dealing with a limited company (might just be £1 of share capital underpinning the debt) makes merchants very nervous.

Hi Ray. Is that because it's harder to get money back if a limited company folds, i.e. the directors aren't usually personally liable? Or is there another reason?

 

[cr0ft]

my brother and myself were discusssing about going ltd but i never took it any further,but he says as a ltd company he says you can pay yourself a tax free dividends upto 36 grand on each tax year and pay yourself min wage throughout the year to limit your tax liability. not sure if that true but my brother and sister in law are well clued on tax affairs etc so i assume this is correct.

It is true. Basically you pay 10% tax on up to about £40k a year of earnings. I believe anyone who is self employed will be paying 20% tax on most of that.

 

[cr0ft]

You also have to gave a company secretary and I think but not sure a chairman. You pay yourself in dividends and you can't just pull money out will nilly. You have to go through your company secretary or chairman.

Company secretary and director can be the same person, at least it is in my business. The ideal payment for a sole director who doesn't have another income source is an annual wage of £7,696 (this incurs no tax or NI liability for the employee or employer) then the rest of your payments are dividends. The first £32,010 of dividends after the above salary incur a personal tax element of 10% which is retained by the company called a dividend tax credit. Your limited company cannot pay out more in dividends than the ***ulative profit it has made since it has started, this is illegal.

Dividends are paid from profits which have either been taxed for corporation tax (previous financial years) or are due to be (current year). The corporation tax rate is currently 20%. As the company keeps the 10% dividend tax credit it effectively pays 10% tax on the dividend payment.

In practise, if I want to pay myself £27,000 of dividends plus the £7,696 salary, the company on paper pays £30,000 of dividends (gross). In practise, it pays you £27,000 and it keeps £3,000 itself. Your self assessment tax return would show you have been paid £30,000 of dividends plus the £7,696 salary. You have therefore earned £37,696 and paid just £3,000 tax. The company will have paid £1,460.80p corporation tax on the money it's earned less the loss due to the salary. Total tax liability between self employed and the company is £4,460.80p

Contrast this with a self employed setup, you will pay tax on all profits. Let's assume the same setup, i.e. £37,696 of profits: -

Tax at 20% on all earnings over £9,440 = £5,651.52p
NI at 12% on all earnings over £7,755 = £3,592.92p
TOTAL tax and NI on earnings = £9,244.44p

So in this scenario you would pay an additional £4783.64p each year for the privilege of being a sole trader.

I don't think there is any scenario that I can think of where it is better to be a sole trader from a pure tax perspective.

I have made a couple of minor simplifications to keep the scenario straightforward above but the figures are 99% accurate. I hope this helps to clear up any confusion on the subject. It may make people more confused, in which case I am sorry

 

[Ray Stafford]

Hi Ray. Is that because it's harder to get money back if a limited company folds, i.e. the directors aren't usually personally liable? Or is there another reason?

Thats the main reason, but also because the decision for a sole trader to move to a limited company status may also be a marker for some other change which the business principal is not disclosing - for example the intent to expand the business activity, take on a high-risk contract or some similar action which may alter the risk profile.

Finally, there is a change which may not be in the business principal's mind.

Lots of businesses go through ups ands downs as part of the normal business cycle. For self employed sole traders, these mean lean times - posssibly disposing of assets to stay afloat, re-mortgaging or taking some other emergency actions.

When this occurs with a limited company, there is an additional temptation - often promoted by external advisors who may earn fees from the process - of putting the company into administration. This may not have been the original intent, but it becomes a more likely outcome.

 

[Ray Stafford]

Company secretary and director can be the same person, at least it is in my business. The ideal payment for a sole director who doesn't have another income source is an annual wage of £7,696 (this incurs no tax or NI liability for the employee or employer) then the rest of your payments are dividends. The first £32,010 of dividends after the above salary incur a personal tax element of 10% which is retained by the company called a dividend tax credit. Your limited company cannot pay out more in dividends than the ***ulative profit it has made since it has started, this is illegal.

Dividends are paid from profits which have either been taxed for corporation tax (previous financial years) or are due to be (current year). The corporation tax rate is currently 20%. As the company keeps the 10% dividend tax credit it effectively pays 10% tax on the dividend payment.

In practise, if I want to pay myself £27,000 of dividends plus the £7,696 salary, the company on paper pays £30,000 of dividends (gross). In practise, it pays you £27,000 and it keeps £3,000 itself. Your self assessment tax return would show you have been paid £30,000 of dividends plus the £7,696 salary. You have therefore earned £37,696 and paid just £3,000 tax. The company will have paid £1,460.80p corporation tax on the money it's earned less the loss due to the salary. Total tax liability between self employed and the company is £4,460.80p

Contrast this with a self employed setup, you will pay tax on all profits. Let's assume the same setup, i.e. £37,696 of profits: -

Tax at 20% on all earnings over £9,440 = £5,651.52p
NI at 12% on all earnings over £7,755 = £3,592.92p
TOTAL tax and NI on earnings = £9,244.44p

So in this scenario you would pay an additional £4783.64p each year for the privilege of being a sole trader.

I don't think there is any scenario that I can think of where it is better to be a sole trader from a pure tax perspective.

I have made a couple of minor simplifications to keep the scenario straightforward above but the figures are 99% accurate. I hope this helps to clear up any confusion on the subject. It may make people more confused, in which case I am sorry

The other thing to factor in is any additional costs in terms of accountancy fees or your own time in additional admin burden.

 

[cr0ft]

Yes that's true. The limited company accounts take me a full day to do (today sadly) where any distraction is welcome!