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Thread: Loans advice

  1. #11

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    Quote Originally Posted by ladymuck View Post
    Top tip: when you pay yourself a dividend put aside a proportion (say, 15-20%) of it as savings towards the tax bill
    yup thats what I been doing.
    however for the extra if I do the same then I wont have enough to cover the cards as 32% of that would be saved aside for tax.
    so my option are directors loan which I take loan or dividends at lower amount to pay off the loan before 9 months is up.

  2. #12

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    Quote Originally Posted by eek View Post
    This was posted on hpc earlier this week - I post it as it outlines what you need to do




    So if you are starting to buy in March next year - you want the credit cards paid off sooner rather than later - so I would be looking at a directors loan to clear them off by December ready for a few months of using them as purchase only cards.

    Oh and find a decent broker who understands how contractors work.
    yeah im thinking pay off cards via directors loan by xmas and then I will have 4 months of no debt before mortgage in May.
    can think about how to pay off the loan in December next year to avoid going over 9 months.
    less loan I need to take out after buying a house the better so covering dividend tax plus payments on account vs directors loan makes sense to go for dl as it will be lower amount to clear off.

  3. #13

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    Quote Originally Posted by xenomorph View Post
    yeah im thinking pay off cards via directors loan by xmas and then I will have 4 months of no debt before mortgage in May.
    can think about how to pay off the loan in December next year to avoid going over 9 months.
    less loan I need to take out after buying a house the better so covering dividend tax plus payments on account vs directors loan makes sense to go for dl as it will be lower amount to clear off.
    But you will have a debt to your company.
    Take the dividends now and you don’t have to pay the extra tax till jan22.
    And you will be genuinely debt free.
    See You Next Tuesday

  4. #14

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    Sounds to me like you don't have a lot of margin for error to be buying a house.

    You could take dividends to clear an £8K debt but you don't have enough to be able to pay the higher rate tax if you did. That says you don't have any kind of substantive reserve in your company if you end up out of contract. You obviously don't have any extra personal reserve or you'd use that to pay the cards. And, you have credit card debt, which hardly screams 'fiscal responsibility'.

    Your real solution is not dividends or director loans or personal loans. Your real solution is to sort out your spending habits to fit better within your income. Otherwise, you're going to be back with CC debts a year after buying your house, perhaps a lot higher, and with a mortgage looming over you, possibly after a house price crash so that you'll be upside down in your mortgage.

    You need to figure out how you are going to save the money out of current income to pay off the debt. You need to do it roughly a year from now. That may mean you have to avoid stupid spending on Christmas, cut out the pub (it's a good way to catch a virus anyway), whatever. Sit down and figure out exactly where the money is going, decide what isn't essential to life, and do without it for a year.

    If you have a plan that will pay off the debt within a year that also includes room for the unexpected like car repairs, then implement it for the next two months. If you are carrying through, your debt will be £1K less than it is now, or better, at the end of the year. If so, then the directors loan makes sense, and if you keep going you'll have a third of it paid off before the end of your tax year in April.

    If you aren't carrying through, with less debt by the end of the year, sorry, you can't afford to buy the house. You don't have enough income to support your lifestyle and a house, and you don't have the discipline to change the lifestyle that quickly. Change either your income or your lifestyle first, then buy a house.

  5. #15

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    Quote Originally Posted by WordIsBond View Post
    Sounds to me like you don't have a lot of margin for error to be buying a house.

    You could take dividends to clear an £8K debt but you don't have enough to be able to pay the higher rate tax if you did. That says you don't have any kind of substantive reserve in your company if you end up out of contract. You obviously don't have any extra personal reserve or you'd use that to pay the cards. And, you have credit card debt, which hardly screams 'fiscal responsibility'.

    Your real solution is not dividends or director loans or personal loans. Your real solution is to sort out your spending habits to fit better within your income. Otherwise, you're going to be back with CC debts a year after buying your house, perhaps a lot higher, and with a mortgage looming over you, possibly after a house price crash so that you'll be upside down in your mortgage.

    You need to figure out how you are going to save the money out of current income to pay off the debt. You need to do it roughly a year from now. That may mean you have to avoid stupid spending on Christmas, cut out the pub (it's a good way to catch a virus anyway), whatever. Sit down and figure out exactly where the money is going, decide what isn't essential to life, and do without it for a year.

    If you have a plan that will pay off the debt within a year that also includes room for the unexpected like car repairs, then implement it for the next two months. If you are carrying through, your debt will be £1K less than it is now, or better, at the end of the year. If so, then the directors loan makes sense, and if you keep going you'll have a third of it paid off before the end of your tax year in April.

    If you aren't carrying through, with less debt by the end of the year, sorry, you can't afford to buy the house. You don't have enough income to support your lifestyle and a house, and you don't have the discipline to change the lifestyle that quickly. Change either your income or your lifestyle first, then buy a house.
    Some of those assumptions are wrong:

    - I have 4/5 month warchest in my company the rest of that is for deposit and stamp duty so dont want to dig into that.

    If I used warchest to pay off debt then im back to square one, where do I find funds to pay the extra tax a year after I just bought a house...after buying a house I wont have much spare cash and still need to keep 4/5 month warchest in company untouched just in case out of contract.

    - These debts are from years ago before I was contractor. only been contracting a year and half so far so dont expect to use credit cards like I used to

    With on going world issues house price crash is almost bound to happen once stamp duty holiday is over and thats when I need to buy when market is lower priced so then when it recovers I will be better off.
    Last edited by xenomorph; 24th October 2020 at 14:07.

  6. #16

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    Quote Originally Posted by xenomorph View Post
    Some of those assumptions are wrong:

    - I have 4/5 month warchest in my company the rest of that is for deposit and stamp duty so dont want to dig into that.

    If I used warchest to pay off debt then im back to square one, where do I find funds to pay the extra tax a year after I just bought a house...after buying a house I wont have much spare cash and still need to keep 4/5 month warchest in company untouched just in case out of contract.

    - These debts are from years ago before I was contractor. only been contracting a year and half so far so dont expect to use credit cards like I used to

    With on going world issues house price crash is almost bound to happen once stamp duty holiday is over and thats when I need to buy when market is lower priced so then when it recovers I will be better off.
    The money for your deposit is in the company?
    merely at clientco for the entertainment

  7. #17

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    Quote Originally Posted by eek View Post
    The money for your deposit is in the company?
    yes so plan to take out as dividends in next tax year.
    I got a warchest still in company to pay myself if I am out of contract, then I got my usual dividends for the year which I keep at low tax band and then rest of the money is kept there to be taken out when I need deposit.
    before anyone says where will I get money for tax then then by 2023 January I have a plan. so that is not a issue.
    Last edited by xenomorph; 24th October 2020 at 16:15.

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