Can he survive by leaving his day job?

MoneySavingBank

Hi all,

A friend of mine who is a AAT Qualified management accountant. While we were talking last week, He came up with some questions and I was not sure about the answers. Please help me to answer if you are aware about this.

His plan is to come into Accounting Practice in future. At the moment he earns 26k. His question is when he starts his business as LTD Company he will be making very less amount of money at the end of first year- Year three. If he pays himself about £650/month, will he be ok? Do you think he will be able to get some sort of benefits such as housing allowance/ family tax credit etc.

I know if you are a self-employed/ sole trader, it is easy to get the above. But I don’t know about being employed to form a LTD company.

I might be missing some information. Please advise me in this issue.

Kind Regards,

MSB

MoneySavingBank

MoneySavingBank wrote: »

Hi all,

A friend of mine who is a AAT Qualified management accountant. While we were talking last week, He came up with some questions and I was not sure about the answers. Please help me to answer if you are aware about this.

His plan is to come into Accounting Practice in future. At the moment he earns 26k. His question is when he starts his business as LTD Company he will be making very less amount of money at the end of first year- Year three. If he pays himself about £650/month, will he be ok? Do you think he will be able to get some sort of benefits such as housing allowance/ family tax credit etc.

I know if you are a self-employed/ sole trader, it is easy to get the above. But I don’t know about being employed to form a LTD company.

I might be missing some information. Please advise me in this issue.

Kind Regards,

MSB

Anything to share?

burg

depends on his circumstances. Maybe try having a play with figures at www.entitledto.co.uk

Alternatively, look at supplementing the lack of income with alternative part-time employment.

Monsoon

The tax credts office sometimes struggle with close company directors, insisting that they are self employed, even though they are not.

I believe very strictly speaking the work done under a close company directorship needs to be paid at NMW in order to qualify as employment and working hours for tax credits, though my approach is to disclose the circumstances to the TCO in writing, stating amount paid and hours worked and let them work out the entitlement to benefit. However, this tends to cause confusion amongst them (see first paragraph!). Any dividends from the company need declaring as other income subject to the first £300 disregard.

However child tax credits (even on his current salary) should be looked at and are not affected by hours worked (working tax credit is affected by hours worked).

Tax credits income does affect housing/council tax benefit awards which are dealt with by the local council and not HMRC.

If he is going into practice then a working knowledge of tax credits is very advisable and relevant and he should do his own research/CPD into his circumstances as this will help him in his future work.

Paul C

One catch with benefits is joint income. So if he has a wife then both incomes could be added together , leaving them above thresholds for benefits.

There is loads in here -

http://www.moneysavingexpert.com/family/benefits-check

And a free calculator here -

http://www.turn2us.org.uk/benefits_search.aspx

RAS

I am surprised that if your friend is looking to start an accountancy business that he wouldn`t be able to research this for himself. If he is not capable of doing this, then perhaps he would be better sticking to the day job.