Is it really worth staying Ltd Co in 16/17?

[APILtd]

I am contracting (in the oil & gas industry) and currently take £10,000 salary and last year I took £27,000 as a dividend. Turnover is generally between £50,000-65,000 per year. I also voluntarily registered to the standard VAT scheme although a lot of my current work is EU based so this doesn't come into play a great deal at the minute.

I am however aware of the fact dividend tax changes will come into play (£5000 allowance) and have read that as the sole employee of the limited company, I don't qualify for the employers NI allowance of £2000 (soon to be £3000) anymore.

As a rough guide using an online calculator, I found that by disincorporating and continuing to trade as a sole trader, I'd incur an increased tax liability of approx £2000. Bearing in mind the costs of payroll, accountants fees and increased dividend tax liability, is staying ltd really as tax efficient as it sounds, and bearing in mind the saving in time, paperwork and accountancy fees, would I not be better off reverting to sole trader.

Thanks for any tips. I do intend to take this up with my accountant but I am always keen to listen to other views.

[Pondlife]

It greatly depends on whether your clients will continue to engage your services as a sole trader.

In other threads on here you can see tales of some clients insisting that not only is there a legal company entity in place but that you are also the director and in some cases 100% shareholder.

If you work through agencies I can't see it working, if you don't then maybe.

[northernladuk]

Sole traders and recruitment agencies

If you are registered as a sole trader and you find work through a recruitment agency, they won’t be able to deal with you in your capacity as a self-employed person under Section 134 of the Income & Corporation Taxes Act 1988.

Contractors’ Questions: Why don’t agencies deal with sole traders? CUK03 :: Contractor UK

I guess it's been updated since the first one as it's the Act 2003 now.

It's here if you want a quick read...

Income Tax (Earnings and Pensions) Act 2003

[Fred Bloggs]

The OP raises a very good question. The benefits of incorporating are now fairly marginal and as the government appears to want contractors to pay the same rate of tax as staff, then the conventional model of contracting is on borrowed time. What's the chances we'll see a dividend tax rate of 15% within the next ten years? Very high to almost certain I'd guess.

[drumtochty]

Virtually unlikely you will be taken on as a sole trader.

Therefore unlikely to be any real choice here.

Loads of Oil and Gas contract and staff people out of work.

Due to experiance I'm still getting the days I want but others are not so lucky up here.

[APILtd]

Thanks for all the replies.

I do understand that to convert sole trader would severely limit employment opportunities..... I'm also very fortunate to be busy with projects, I know too many men in the industry who haven't worked for months, I specifically work in pipelines so when it's busy it's busy but it can get very quiet, very quickly!

I was more interested in the general debate when all new regulations have come into force.