Should Electricians Be Self Employed or Ltd Companies for Tax

Many local electricians like ourselves have often wondered whether to become self-employed in an electrical services company or to registered limited liability companies for the purposes of taxation. The question is very broad in that to start a limited liability company has additional legal measures that you will need to adhere to in order to become a registered company.

But for the purposes of this article, let’s limit ourselves to the taxation rules of a self-employed electrician against those of a limited liability company.

Advantages of self-employment in relation to tax in the UK

Tax money retention

It is important to note that as a self-employed electrician, you will not have your tax deducted as PAYE. This means that you will be able to retain your money for a period of 6 months as tax is payable on 31st July and 31st January. Your cash flow position will improve significantly in the intermittent months.

You can make an expense claim

Like any other business, you will deduct all your business expenses before paying tax. These expenses include cost of goods from sales revenue, capital allowances, and interest on loans.

Government funding

All self-employed electricians in the UK will qualify for the Prince’s Trust if they are aged between 18 and 30 and want to start their own businesses

Regeneration area

If your business is located in any regeneration area in Britain, you qualify for government funding if you want to start a business. So why not take advantage of this?

Child tax credits

Any self-employed business owner in the UK qualifies for the tax credit depending on the number of children under 16 and adults within the family that are working.

 

Advantages of a limited liability company in relation to tax in the UK

Less Personal Tax

If you are an owner of a limited liability company, you can decide to do away with the salary (which is taxable as PAYE) and get paid with dividends which attract lesser taxation.

Corporation tax set at 20%, set to be lowered to 17%

Companies are taxed what is called corporate tax. In the UK, the company profits are taxed at the rate of 20%. This is set to be lowered to 17% by 2020.

Government funding

Corporations, especially those in charity works attract heavy government funding, mostly at very low interest rates.

Flexibility of salary/dividend tax mix

Limited liability company directors can opt to get small salaries while the remainder of their emoluments is paid as dividends. This will depending on the prevailing taxation regime. If the PAYE is lower than dividends tax, then the director will go with the former. Sometimes they will mx the two.

Allowable expenses and reliefs flexible

In many jurisdictions, United Kingdom included, there is a very flexible schedule of allowable expenses and reliefs. This ideally lowers the amount of tax owed to governments.

Based on the above taxation advantages, it is for the business owner to decide which of the two options – self-employment and LLC – to go with. In the words of experts, they advise that electricians start off as self-employed business owners and then as business grows, they graduate these businesses into limited liability companies. This is not cast in stone though. You can opt for whatever option that best works for you.

North East Business Owners Could Suffer After Brexit

Every business owner in the UK may be feeling a little anxious after the voters in the country decided to leave the European Union in a referendum dubbed ‘Brexit’ – and, with good reason. Uncertainty is never good for business.

 Brexit has just thrown a spanner into the business juggernaut between the UK and EU.

Business owners in the North East are especially pensive. As they are nearer the continental Europe, their businesses will feel the heat more. Whether the uncertainty is real or imagined, only time will tell. However, based on the realities on the ground, experts agree that in the short run, businesses will definitely take a hit in revenues until an equilibrium is found.

After all the debate (and hubris) about Brexit, it is now time to narrow down to the hard facts. Below, we have listed a number of reasons why North East business owners could suffer.

Consumer Confidence on Downward Spiral

Why consumer confidence is in crisis in the UK. This is a normal reaction among consumers whenever they are faced with an uncertain future. They tend to hold back on non-essential spending. As a result, manufacturers are left with goods they cannot sell, and wages they are struggling to pay. Overall, the economy slows down. According to a GfK survey, British consumers will assume a ‘wait and see’ mode until the impact of Brexit comes to light. North East business owners, like ourselves here at Caztec ought to be wary if this continues into the unforeseeable future.

The Free Fall of the Sterling Pound

The Sterling Pound took a dive as soon as the results of Brexit were announced. This makes UK exports very cheap on one hand and imports very expensive. Those in the import business will suffer lower profitability in the short run until the Pound gains against the world major currencies such as the US dollar and the Euro.

Immigration Policies

One of the rallying calls for the proponents of Brexit was that the EU integration has led to loss of British jobs to cheaper markets in Eastern Europe. This might be true, but it is important to remember that businesses exists to make profits. If it is cheaper to produce in Eastern Europe, it means that businesses have larger profit margins. Immigration policies are set to be tightened, making it harder for cheap labour from Eastern Europe to enter Britain. British business owners will resort to using the more expensive British labour market. This has the net effect of increasing the cost of production, making British products more expensive than those of competitors. Loss of market to cheaper products is something that business owners in the North East ought to be wary of.

Delays in Trade Negotiations

It is obvious that Britain will have to renegotiate trade deals with the EU. These negotiations take time. In the meantime, business owners have to find ways to cope with market access in the EU. This can be an expensive affair. British products and services will attract taxes and restrictions since the UK is no longer part of the UK. Loss of market is one of the scariest thing for any business owner. It is especially so for business owners in the North East whose significant market is in the European Union.

Relocation of Business by Multinationals

Multinationals have been threatening to relocate to Germany or France if the Brits decide to leave the EU. Supposing this happens. Britain loses its appeal all over the world as the bridge into the vast EU market. Business owners in the North East will lose the “first-in-the-market” advantage they have enjoyed for so long.

Access to European Funding

Brexit means that business owners in the North East and to a larger extent, the British government, will no longer access cheap funding from the EU financial institutions. The cost of financing a project will be much higher due to higher interest rates. Business financing is one of the things that worries business owners.

EU Subsidies on Agricultural Produce

Loss of farm subsidies means British farm produce will not be as competitive as produce from farms within the EU. This will lead to loss of market share and hence lower profitability. This will obviously hurt farms in the North East England.

Property Price Fall

Relocation of multinationals to the EU members dents the demand for housing in towns and cities in Britain. The lower the demand, the lower the price.

Foreign Relations

There is obviously some “bad blood” between the EU citizenry and the British after the Brits decided to exit EU. Whether there will be retaliatory change of immigration laws and trade relations is not a matter of “if” but “when”.

There is a popular opinion doing rounds that the negative effects of Brexit are short run. However, this will depend on how Theresa May and her government shepherds the economy in the next 18 months. Business owners in the North East should put in contingencies for the worst and hope for the best.

3 North East Builders’ Merchants That Give Trade Discounts

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Looking for building materials for your home is not easy, as you’ll need to materials that are both stable and secure so that the foundation of your home will be strong. What’s more, building supplies aren’t cheap, as they come in bulks.

A great way to save money on building supplies is by using trade discounts. Here are some builders merchants in the North East area that gives trade discounts. We here at Caztec are frequent customers. Continue reading “3 North East Builders’ Merchants That Give Trade Discounts”