Opening a limited company and not withdrawing money

[Hungryhippo]

Evening all,

I’m currently a dreaded permie who’s company is doing a massive redundancy in my department. This is obviously terrible timing in terms of covid, brexit, redundancies everywhere, ir35 etc.

If I’m eliminated I should get a fairly sizeable payout. At least six months pay plus if my very early pregnancy works out, I may be entitled to six months of maternity pay too (it’s part of the offer for eligible (pregnant) staff affected by redundancy).

I’ve been at this job 6 years but previously was a contractor with a limited company. I’ll have to admit I found the company admin overwhelming - I was new to this country when I first started contracting here (although I had been a long term contractor in my home country).

The thing is I would potentially have six months between the date i stop working for my employer and the baby arriving. I can’t just sit around on my arse for six months because I’d go mad, but I’m looking at getting a short term contract.

I’d be happy to take the umbrella route but I’d get taxed like crazy this financial year given I’d have received my current salary, then redundancy package and maternity package as a lump sum (even with the 30k tax free).

Would it make sense to just operate as a limited company and not take any money out until such time I need it? It would probably not be needed for some time. Obviously I’d need to pay corp tax and vat etc but I’d really be keen to avoid any further personal tax. I already will have reached the 40k max AVC limit for tax relief.

Does anyone think just letting some money build up makes sense? Or is this a dumb idea?

[NowPermOutsideUK]

Evening all,

I’m currently a dreaded permie who’s company is doing a massive redundancy in my department. This is obviously terrible timing in terms of covid, brexit, redundancies everywhere, ir35 etc.

If I’m eliminated I should get a fairly sizeable payout. At least six months pay plus if my very early pregnancy works out, I may be entitled to six months of maternity pay too (it’s part of the offer for eligible (pregnant) staff affected by redundancy).

I’ve been at this job 6 years but previously was a contractor with a limited company. I’ll have to admit I found the company admin overwhelming - I was new to this country when I first started contracting here (although I had been a long term contractor in my home country).

The thing is I would potentially have six months between the date i stop working for my employer and the baby arriving. I can’t just sit around on my arse for six months because I’d go mad, but I’m looking at getting a short term contract.

I’d be happy to take the umbrella route but I’d get taxed like crazy this financial year given I’d have received my current salary, then redundancy package and maternity package as a lump sum (even with the 30k tax free).

Would it make sense to just operate as a limited company and not take any money out until such time I need it? It would probably not be needed for some time. Obviously I’d need to pay corp tax and vat etc but I’d really be keen to avoid any further personal tax. I already will have reached the 40k max AVC limit for tax relief.

Does anyone think just letting some money build up makes sense? Or is this a dumb idea?

Many people do this exactly and end up with very big ltd war chests. No issue at all with keeping cash in the bank and not taking anything out

When you have made your fortune you can look at mvl or buying a property with the funds.

Good luck on your adventures

[GhostofTarbera]

Evening all,

I’m currently a dreaded permie who’s company is doing a massive redundancy in my department. This is obviously terrible timing in terms of covid, brexit, redundancies everywhere, ir35 etc.

If I’m eliminated I should get a fairly sizeable payout. At least six months pay plus if my very early pregnancy works out, I may be entitled to six months of maternity pay too (it’s part of the offer for eligible (pregnant) staff affected by redundancy).

I’ve been at this job 6 years but previously was a contractor with a limited company. I’ll have to admit I found the company admin overwhelming - I was new to this country when I first started contracting here (although I had been a long term contractor in my home country).

The thing is I would potentially have six months between the date i stop working for my employer and the baby arriving. I can’t just sit around on my arse for six months because I’d go mad, but I’m looking at getting a short term contract.

I’d be happy to take the umbrella route but I’d get taxed like crazy this financial year given I’d have received my current salary, then redundancy package and maternity package as a lump sum (even with the 30k tax free).

Would it make sense to just operate as a limited company and not take any money out until such time I need it? It would probably not be needed for some time. Obviously I’d need to pay corp tax and vat etc but I’d really be keen to avoid any further personal tax. I already will have reached the 40k max AVC limit for tax relief.

Does anyone think just letting some money build up makes sense? Or is this a dumb idea?

You already have a new contract - well done

If not, no one is going to take a pregnant contractor on - are you mad?? Especially since they can get 1000 not pregnant contractors in at a lower rate

Relax, have your baby, chill, find a job in better times


Sent from my iPhone using Contractor UK Forum

[Hungryhippo]

Thank you both for your comments. Glad to hear it’s okay to leave funds in a ltd company. I could take that income or dissolve the company when it’s needed.

Yeah I know being pregnant is not an ideal time to start a contract, but having six months off pre-baby and then up to a year with the baby leaves a huge gap of unemployment on my CV as well as letting my brain rot. I’d be looking at a short gig, potentially well below my old day rate ?.

Alternatively I could do some study to better my CV but to be honest with the state of affairs I don’t think the future in IT is that bright!

Maybe I’ll just learn something useful like carpentry or plumbing!! Everyone needs plumbers!

[ladymuck]

I think it's really disappointing that you see time off with your newborn as a "huge gap of unemployment on my CV" rather than the essential, child raising role it really is.

This isn't a dig at you, btw. More a societal observation.

[jayn200]

Thank you both for your comments. Glad to hear it’s okay to leave funds in a ltd company. I could take that income or dissolve the company when it’s needed.

Yeah I know being pregnant is not an ideal time to start a contract, but having six months off pre-baby and then up to a year with the baby leaves a huge gap of unemployment on my CV as well as letting my brain rot. I’d be looking at a short gig, potentially well below my old day rate ?.

Alternatively I could do some study to better my CV but to be honest with the state of affairs I don’t think the future in IT is that bright!

Maybe I’ll just learn something useful like carpentry or plumbing!! Everyone needs plumbers!

The future in IT is great in some areas. What are you doing currently? Now is a great time to upskill depending on when you originally learnt your skill set. A lot has changed in last 10 years, actually just the last 5. Cloud computing, data science, security, agile... Maybe they're not all new concepts but companies have embraced these like crazy last 5 years and depending what area of IT you're in updating your skills could net you more money than a quick 3 month contract at a low rate.

[Fred Bloggs]

OP, you may not need to register for VAT for a 6 month contract. Depends how high your rate is and whether you will exceed the VAT registration threshold in turn over. If you won't, then don't register for VAT. Your company admin will be a lot simpler if you aren't VAT registered.