Tao Business Services

18/10/2022

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15/11/2017

Sole trader or Limited Company?

I have often been asked this question. If there was a simple, clear-cut way of answering it, this blog wouldn’t be necessary, I guess!
However, there are a few points to consider before you decide;

• Is there a tax advantage with a Limited Company? – Well, there could well be, depending on how much you want/need/can afford to pay yourself and what your levels of sales and profit are. Corporation Tax is now 19% and Income Tax 20% but either or both of those could change. You can pay dividends via a Limited Company but now only the first £5,000 per year is tax free. However, your salary and pension, for example, are business costs for a Limited Company and so can be deducted from sales before applying Corporation Tax.
• With sole trader status, there is no distinction between personal and business assets, whereas with a Limited Company there is. This could be an advantage under certain circumstances.
• Limited Company status can project a different image than a sole trader but be mindful that there are additional responsibilities with a Limited Company, such as insurances, preparing and filing annual accounts, complying with tax and labour law etc, as well as the additional costs that go with these.
• And a final caution regarding IR35 legislation. If you set up a Limited Company with yourself as the sole Shareholder and Director as you believe you’ll be financially better off but you only have 1 customer or 1 main customer, HMRC may view this as you being effectively employed by that customer and this could lead to National Insurance being due. The actor, Robert Glenister was recently “caught” on this very point.

So, no, there isn’t a simple, clear-cut answer but I can advise you on whether a Limited Company might be the right thing for you. Contact me on any of the ways below and I’ll be happy to have a free chat with you:

e-mail: [email protected]
mobile: 07985 645087
website: www.taobusinessservices.com
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Accountancy services, Training and Interim Financial Management for small businesses and business owners in Birmingham, West Midlands.

15/03/2017

Something to think about for those of you who are on the VAT flat rate scheme or are thinking about it.

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28/02/2017

Still lacking on lots of detail but here are the basics of the proposed tax changes.

TAX returns could soon be a thing of the past under new changes proposed by HM Revenues & Customs. Here is what you need to know.

27/02/2017

Making Tax Digital - are we any further forward?

Mike Cherry, chairman of the Federation of Small Businesses, said that without clear answers to small firms’ fears, the plans, due to take effect in 2018, should be delayed until 2020.

15/02/2017

The financial basics for the self-employed. A good read - especially the last bit about good accountants ;-)

14/02/2017

This is voluntary now but I suspect that this may well be mandatory in the not too distant future.

Read our article: 'Changes in the reporting of benefits in kind'. Contact us today for more information about our Employment Law, Health & Safety, and HR services.

03/02/2017

I'm sure there are plenty of big companies HMRC could investigate, without mentioning any names, but their focus seems to be more on SMEs - please be aware -

HMRC compliance crackdown targets SMEs, resulting in £468m for year ending 31 March 2016

01/02/2017

In case you are not already aware of this, a small tax allowance you might be able to take advantage of.

HMRC campaign bids to reverse low take-up on George Osborne tax break worth up to £220 a year