For your pleasure: sole trader vs company tax calcs (Google Sheets)

[proudfeet]

Pease see

Tax calculator R+M 2 - Google Sheets

It assumes a salary of £12.5k for the company and uses the corporation tax rate of 17% as from April this year.

[TheCyclingProgrammer]

1. Why £12.5k - a lower salary is will be more tax efficient due to NIC.

2. Corporation tax likely to stay the same at 19% this year from what I’ve heard, the Tories said they were going to scrap lowering it for now and likely to be confirmed in the budget.

[Lance]

Pease see

Tax calculator R+M 2 - Google Sheets

It assumes a salary of £12.5k for the company and uses the corporation tax rate of 17% as from April this year.

The 17% CT rate that they’ve already announced they’ll scrap????

That being said that's a useful sheet for anyone considering sole trader, which IMO will become a thing for IT contractors.

For the second sheet showing the effective tax rate graph, can you add PAYE in there?

[eek]

The 17% CT rate that they’ve already announced they’ll scrap????

That being said that's a useful sheet for anyone considering sole trader, which IMO will become a thing for IT contractors.

For the second sheet showing the effective tax rate graph, can you add PAYE in there?

You can't be a sole trader if you work through an agency - agency act (1977 from memory) ensures that's the case.

Plus sole trader = unlimited personal liability - that isn't a sensible thing..

[WordIsBond]

1. Why £12.5k - a lower salary is will be more tax efficient due to NIC.

Not once the higher threshold for employee NI kicks in.

You have no income tax on that extra £4K in salary, just as you had no dividend tax on it when it was dividends. Since you pay no NI on the extra £4K with the higher salary, for you it is a wash.

YourCo pays more NI at 13.8, but saves 19% on (salary + ERNI). So your company saves net about 8%. If you have two employees and claim the employment allowance, it's even better to go to the higher salary.

This is moot if the NI threshold increase ends up not happening, of course.

[LondonManc]

You can't be a sole trader if you work through an agency - agency act (1977 from memory) ensures that's the case.

Plus sole trader = unlimited personal liability - that isn't a sensible thing..

Beat me to it, with an extra caveat that most clients won't work with sole traders from what I've seen.

[ladymuck]

Not once the higher threshold for employee NI kicks in.

You have no income tax on that extra £4K in salary, just as you had no dividend tax on it when it was dividends. Since you pay no NI on the extra £4K with the higher salary, for you it is a wash.

YourCo pays more NI at 13.8, but saves 19% on (salary + ERNI). So your company saves net about 8%. If you have two employees and claim the employment allowance, it's even better to go to the higher salary.

This is moot if the NI threshold increase ends up not happening, of course.

This is why I pay salary up to the income tax threshold. It also keeps my NICs topped up so, if there is still a state pension when my age group reaches whatever state mandated retirement age (probably 99 by the time I get there), I will at least receive enough for a cup of coffee once a fortnight. That and I have no issue with paying for the public services I use.

[Hobosapien]

You can't be a sole trader if you work through an agency - agency act (1977 from memory) ensures that's the case.

Plus sole trader = unlimited personal liability - that isn't a sensible thing..

Aye, self-employed is a non-starter for normal contracts. Neither the agency or client will accept it as it opens them to potential liability for employer related taxes if HMRC deems the contractor was employed.

I'll be using self-employed status for my Plan B (now my Ltd is well closed) in the early days as it has a good chance of not breaking the personal tax allowance threshold, and if it does get that successful then I'll convert to Ltd. This spreadsheet may come in use to determine when the changeover may be worth doing financially wise.

The personal liability aspect is only really valid for debts (which I won't be incurring any) as would need public liability or other liability insurance to cover any accidents or cock-ups caused. I don't intend incurring any of those either.

[eek]

The personal liability aspect is only really valid for debts (which I won't be incurring any) as would need public liability or other liability insurance to cover any accidents or cock-ups caused. I don't intend incurring any of those either.

You have a different set of issues to me - I have SAAS in the USA to work for and against me. The insurance is

Sole trader does work but only in a very limited set of circumstances (consumer facing businesses) when working for other companies it's completely pointless.

[Jolie]

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