I might be able to help a bit, I was freelance for 10 years as a self employed book keeper, and just become limited last September. So as self employed I would pay 20% tax on my profits, after the individual tax free allowance (10k for14/15), and perhaps in your case a slight bit of 40% tax too?
Whereas now I am limited, I take a salary of £10k via the business, tax free, I can legitimately claim for business mileage, business use of mobile, as well as the usual overheads I have etc...., plus I can take dividends taxed at 10% as long as I am a 20% tax payer, and then I received a 10% tax credit towards my dividend payments, so in short, no tax is due on the dividends. You must be a shareholder to take dividends, and you would be the director too of the limited business. You then pay 20% of the limited business profits.
Obviously being self employed you have one return to do per year to HMRC, whereas with a limited company, there is the Annual Return to companies house, plus the annual filing of the limited companies house, plus a self assessment for you to declare your dividends etc. So much more paperwork, hence, higher accountancy fees.
Also going forward, the money in the business , is the business's and not yours whereas freelance, its nice to have freedom to your hard earned cash! For me being limited is perfect as it controls what I take and spend, but then if I have to update computors etc, software, its nice that its coming from the business and not my own pot...
unfortunately the HMRC have withdrawn the entreprenurial relief for businesses buying or selling a going concern, just in Nov 14, but sorry to say, if you had gone limited prior to this, your accountant could have appealed to HMRC for the limited co to 'buy' your sole trader business, at a figure which would be representative of 3 years profits, and akin to the marketplace for your business style, so lets say £100k profit over 3 years.... they would charge you 10% entreprenurial tax relief on this at 10% (its a bit more complicated but this is the easy way to explain) so you would pay £10k, and then you would be sitting on a figure of £100k on a directors loan account, to take as you wish tax free (because you paid the 10% tax on it, it cant be taxed again).... and then you could have had a good few years tax free.......... too good to be true......hence they cancelled the scheme in Nov after a good few years of running it......
You wouldn't have actually had the £100k in ready cash, it would be balance sheet items so just a case of posting a few journals, the only cash to part with within 16 months of the date of sale, would have been the £10k. x
Thanks noon. That's given me loads to think about, shame I missed that opportunity, but I'm seeing my accountant this week so I'll raise those other points... Talking peace, what would be the other reasons besides tax, is it the looking more credible thing? Also, could it end up costing me more than staying freelance? Thanks