Running a limited company while being employed

May 27, 2021
It is quite common to have full or part-time employment while operating a limited company, reasons for this can include:
  • Running your stealth startup before you have the revenues to go out on your own
  • Working a part-time job while contracting via your limited company
  • Temporarily on a client’s PAYE scheme for a contract that falls inside IR35
  • Working a full-time job while operating a ‘Side Hustle’
For these scenarios we have tried to detail some areas you should consider:

Potential Opportunities

Potential perks may include:

Multiple Salaries & National Insurance

Class 1 NI Contributions are payable in thresholds the first of which includes the Primary & Secondary Thresholds that are currently £823 per month or £9,880 per year, and £758 per month or £9,100 per year, respectively, for the 2022/23 tax year. These are essentially the nil rate thresholds for NIC where you do not pay National Insurance. It is important to note that, unlike tax where a threshold is allocated to a particular individual for a given tax year, NIC thresholds are allocated for each individual employment. This is therefore a potential area to save on national insurance contributions as you are splitting your income between multiple employments (i.e. your job and the PAYE Scheme of your limited company).

Declaring Dividends

It is likely that the payment terms and timing of your part-time employment will be dictated by your employer, but your limited company can remain useful, allowing you to either retain profits in the company or draw down on dividends utilising the more efficient tax rates.

VAT Threshold

The income via your employment does not need to contribute to your mandatory VAT registration. This could allow you to remain or become cheaper to your non-VAT registered customers.

Potential Pitfalls

Some of the possible pitfalls may include: 

Employment Contract

It may be advisable to ensure that your employment contract with your part-time employer allows you to run your limited company while holding the position.

Tax Code

It is likely your tax code on your payroll with your employer will change or include items that imply that you have another source of income. It is unlikely your employer would ever question this, but it could be an indicator that you have another employment or contracting role. It is therefore important that you remain upfront and open with your employer from the outset.

State Pension Record (National Insurance)

Whilst you can indeed realise National Insurance savings by splitting your income between part-time employment and your limited company it is important to consider your State Pension Record. At least one of the employments needs to exceed the Lower Earnings Limit for National Insurance of £533 per month or £6,396 per year to ensure you receive a State Pension Record.

Auto Enrolment

Like national insurance splitting your income between multiple employments or via a part-time job and your limited company can have some drawbacks if your income splits drop between the 2 levels below:
  • AE Enrolment Trigger – if your payslips from each individual employment drops below the auto-enrolment trigger of £10,000 per year (pro-rated in line with your pay frequency) you could miss out on being automatically enrolled into the pension scheme
  • Pensionable Pay – this may not apply if your employer or your workplace pension via your own limited company uses a different type of definition for pensionable pay. However, where they choose to use the statutory auto-enrolment definition of Qualifying Earnings (banded earnings) you could lose out on pension contributions should your income via this employment fall below the Lower Earnings Limit.

If your earnings do drop below the £10,000 per annum but exceed the Lower Earnings Limit, it could be advisable to opt into the pension scheme to utilise your entitlement to your employer pension contributions.

If you are in this scenario or considering it as an option please get in contact with us at Spondoo Accountants.

more tips

Can You Claim Food as a Business Expense?

The golden rule when claiming business expenses is that the cost must be “wholly and exclusively” for business purposes. So, where do you stand when it comes to food and drink? After all, everyone needs these things to survive. When does it become an allowable expense? Read on to find out when your business can claim food and drink as an expense.
READ MORE

Self-Employed National Insurance Class 2 and Class 4 Rates

If you are sixteen and over, self-employed (sole trader or in a partnership) and making a profit befitting the ‘small profits threshold’, you are liable to pay national insurance.
READ MORE

Key UK Personal Tax Year Dates & Deadlines 2021/2022

Are deadlines creeping up on you? Spondoo is here to ensure you keep on top of things and take control again. These are the important dates you should take note of.
READ MORE

How To Set Up A Limited Company 

A Step-by-Step Guide  This is an easy-to-understand, step-by-step guide, to opening a successful limited company. But before we dive in, let’s check the legality surrounding it. 
READ MORE

Accountants in Haslemere, Surrey

We are qualified accountants providing personal and professional services for start-ups, established companies and individuals in and around the Halsemere area in Surrey. With the rise in technology, we have embraced the digitisation of accounting using efficient digital accounting tools to offer reliable services to our customers. Our goal remains to get our clients the best accounting and taxation services at the most affordable rates.
READ MORE

Onsite Canteen and Lunch Vouchers - Are They Taxable?

The provision of food and drink to an employee by their employer is a lovely thing to do. Eventually, it promotes teamwork, loyalty, a sense of belonging and even improves productivity. Taking it at face value makes it look like a simple act of kindness. However, unless it is done correctly, it can cause tax and national insurance compliance issues for the employer.
READ MORE
1 2 3 18
LEARN MORE
Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.

4.9

Arnie Ayton accountant ratings on VouchedFor
Arnie Ayton accountant ratings on VouchedFor
© Copyright 2020 - Spondoo - All Rights Reserved
How, can we help?
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram