Self employed or limited company?

[purplepeony]

What are the pros and cons of each?
I am registered as s/e.

My work does not involve trading, so no assets or stock etc. I work as a writer and private teacher mainly. Income is around £20K max on average.

My son seems to think that I'd be better off a limited company in so much as I could claim more in expenses.

Anyone any suggestions?

It really is dependent on what you want to claim for and how much paperwork you are prepared to do, although, at 20K max per year I would be fairly confident that staying self employed would be better for you financially.

The main advantages of becoming a limited company for someone in your situation tend to be:

• Childcare vouchers. If you pay for OFSTED registered childcare, going limited could save you paying tax on your childcare costs.

• Limited personal liability in case of lawsuits, financial troubles etc.

• More 'professional' image, which may be important in some fields.

• The ability to 'juggle' your income between tax years to avoid paying higher rate tax (e.g. if you earn over the higher rate tax threshold one year you can 'reinvest' that extra back into your company and draw it out as wages in the following tax year - thus avoiding paying higher rate tax on that portion of income). Not an issue unless you expect to hit the next tax bracket though.

You have to balance these advantages against increased accountancy charges (I'd guess another £300 per year for your type of business). If you choose to do your paperwork by yourself be warned that limited company paperwork is nothing like a simple self employed person's tax return and you'll have to factor in your time (lost earnings) in completing it all.

Incidentally, there are very few expenses that can't be claimed as a self employed person - what ones did you have in mind?

I agree 100% with neverquitesure.

I've lost count of the times that friends have called me up in a panic because they have received another reminder from Companies House for a return/annual accounts that they dont have a clue about.

As neverquitesure says there are very little differences in what you can claim as self employed v a limited companies but there is an awful lot more compliance issues not to mention the ncreased accountants charges.

Unless you need the protection of limited liability I would say self employed all the way.