should I switch to a limited co?

[nojellybabies]

I would appreciate some wise words.
I've been a sole trader since 2004. In 2017-2018 I greatly increased my hours and consequently earnt £65,800 which is very exciting.
I've just done the tax return: tax was £20,000 (a third of what I earnt). I have very few expenses (people pay for my brain-work and I don't travel much) but the tax was still reasonable because I put £55000 into my private pension (much needed, as it has languished since 2004....).

This year (to 5th April 2019) I'm on track to earn £76,450. I already have a company set up but dormant. My options, I think, are either to pay practically everything into pension again or to switch to trading as a ltd co as then (if I understand rightly) everything will be taxed at 20%.

i'd appreciate some advice. I've been a bit lazy about this issue over the years but when I was earning under £40 k it didn't really make much difference. One factor that used to apply was that I wanted to make sure my national insurance contributions were maxed out for the sake of the old age pension, but I think that's taken care of now as I've paid them since 1997 without a break.

Thank you.

On flat rate you will pay HMRC 16.5% of the gross of what you bill

So if your annual invoice is £100k (net), which is £120k gross incl. VAT

Your annual VAT bill will be £19,800. (16.5% of £120k)

That means you will have a flat rate surplus if £200.

Therefore if is advantageous to be on the flat rate scheme if you spend less than £1,200 per year on goods that are VAT reclaimable

The above assumes you are a low cost business on 16.5%

thank you

how confusing that the incoming 20% is 20% of invoice price yet the outgoing 16.5% is 16.5% of the 120%....

I'm off to check if I'm really a "low cost" business.

Details here

www.gov.uk/vat-flat-rate-scheme/how-much-you-pay

I did the gov website well written and explains things pretty well.

You did it?

DH counts as a low cost business and after crunching the numbers there was so little in it that we went for standard vat rather than flat rate. Obviously not advising you to do the same.

A tip for FreeAgent - RBS bough FreeAgent last year, and if you open a RBS business back account (charges £5/ month) you get FreeAgent for free....works out far cheaper that paying for licence every year!

@nojellybabies oops, typo! I think the gov website is well written and explains things pretty well.

@Rosie1976mini agree FreeAgent makes everything really easy

Disappointed now as I genuinely thought you wrote the site!

If you work from home you can also charge your internet and a percentage of your bills. I would see an accountant specialising in small businesses - I’ve made a huge saving being a ltd company and the accountants are very good at saving you money - legally of course!!!!! As PP have said you are also very near the VAT threshold —- do you charge your clients monthly via invoice? As you will need to add the VAT to that.