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On course to earn way over 40k this year with self employment, is it worth becoming a limited company?

(11 Posts)
InkedGreen Wed 04-Sep-19 20:47:35

It does save quite a bit of a tax, but accountant fees are £130 a month and seems like more work that will take me away from work.

Plus if the higher rate of tax is increased in the budget it doesn't save that much at all on a £70k profit a year

Wwyd?

Racmactac Wed 04-Sep-19 20:51:42

But you would leave the money in the business and only take a basic salary of £10k ish. The rest would be taken as dividends and therefore less tax to pay.

Egghead68 Thu 05-Sep-19 07:54:55

I am not sure it saves much tax. Don’t quote me but I think you have to pay 20% business tax on any profits then a further 19 or 20% tax on any dividends, I.e. nearly 40%. If you take money as a salary it may be even higher.

Pythonesque Thu 05-Sep-19 08:17:18

If you have family members who are not tax payers and can legitimately do some work for you, paying them can create some real tax savings overall. I would have a detailed discussion with your accountant about how the numbers would work out, advantages and disadvantages of becoming a company - worth paying for that so that you know your options both now and in the future.

AtillatheHun Thu 05-Sep-19 08:21:06

what do you do? if there is any benefit, it's in keeping the legal entity separate from your personal wealth so if the worst happened (eg negligent advice / faulty goods), the assets of the company are all that are at stake (assuming certain specific director's responsibilities don't apply)

HugoSpritz Thu 05-Sep-19 08:23:43

Have you discussed the advantages v disadvantages with a solicitor?

Have you had specific tax advice from a tax specialist rather than your auditor? Both would be sensible.

maryelizabeth71 Thu 05-Sep-19 08:27:41

Depends on your individual situation. Ltd can give more advantages than purely tax savings.

£130 per month seem very high!

Egghead68 Thu 05-Sep-19 16:20:13

Just to say I would go for a private accountant who charges you only when they need to do work rather than a franchise like "Taxassist" who have a monthly fee (and you get virtually no contact with a qualified accoutant). Works out much cheaper I think.

Namechangeforthiscancershit Thu 05-Sep-19 16:26:39

It doesn't need to cost £130 a month at all. If you want to go down this route then get some more quotes for sure.

I'm not sure it's a lot more tax efficient at all is it? Unless you're planning to leave money in the co?

You need to think through liability issues too.

Metempsychosis Thu 05-Sep-19 16:29:58

I’d wait until after the next election if I were you. There could be big swings one way or the other.

taxguru Sat 07-Sep-19 11:46:25

There are a lot of pros/cons besides just the tax. You need to look at all aspects.

As for tax, yes, even at relatively low profits, it "may" be better. Depends on lots of factors, i.e. whether you need to draw out all the profits or whether you re-invest to grow the business. Whether you can benefit from your spouse being a shareholder and/or director. The kind of car you use for business and private v business mileage etc. Potentially better employment related benefits/rights. There are also some tax downsides, such as not being able to use the cash basis. Lots of aspects to put into the mix.

As for extra costs, that's because there's more to do, such as payroll for the director(s), extra tax return, more complicate accounts, etc.

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