Setting up a Limited company as single person, help?

Debt_Free_Chick

There is no double taxation, but to be honest, if you're struggling with the tax issues of being a sole trader, I really doubt you'll manage the additional tax involved with a limited company + PAYE + NIC and not to mention all the Companies Act compliance :eek:

HMRC run free workshops to help you with tax if you're self-employed and you can book online

Ballymackeonan

There's some good information on this for setting up as a business yourself - sole trader - with links to the Inland Revenue info.

http://www.bytestart.co.uk/content/19/19_1/what-is-a-sole-trader.shtml

A lot of good stuff on the site on limited company status etc as well!

nickc25

Treading_Water wrote: »

Hi
As mentioned before, there is no double taxation!!!
The difference is:-
As a sole trader you will pay 20% tax on all profitable income over your personal allowance. If you incorporate you will pay 21% Corporation tax on profits.(You pay yourself wages up to your personal allowance, which are then not taxed and deducted before the calculation of taxable profits.
As a sole trader you also pay class 2 Nis of £2.40 per week and Class 4 Nis of 8% on profits over £5715. If you incorporate any further profits are paid as dividends, which unless they take you into the higher rate band, are not subjesct to further taxation and are not liable to income tax.
The only higher costs are the admin and accountancy charges, which unless you are only making minimal profits are easily offset by the savings above. a decent accountant can also be worth their weight in gold savings made through taxation planning, plus reduced hassle and stress.
Obviously the choice is yours, but don't get confused by this double taxation idea.

Ah ok. That was the confusing part really. So the business gets income. It then gets expendature such as my wages. The business gets taxed on profit after my wages and all the outgoings? If so then the business would not get taxed then would it because it would not be making a profit because the wages is all I am bothered about if you know what I mean. Is that correct?

I currently do my own accounts with a spreadsheet and realise Id have to get them done officially though.

isplumm

Nick,

If you are going to go the Ltd route ... not sure that you should, but that is up to you ...

Suggest you do following ...

1. Pay yourself £7,500 a year,
2. Pay PAYE / NI every quarter,
3. Pay yourself dividends upto 40% tax bracket .... you don't pay NI on dividends ...

I would be tempted to meet with a good accountant ... also use the links suggested here.

Mark

johnllew

nickc25 wrote: »

Ah ok. That was the confusing part really. So the business gets income. It then gets expendature such as my wages. The business gets taxed on profit after my wages and all the outgoings? If so then the business would not get taxed then would it because it would not be making a profit because the wages is all I am bothered about if you know what I mean. Is that correct?

I think you would be best advised to get an accountant. Both your and certain other's comments here can be described as a bit uncertain.

johnswife

Hi Nick,

I would definitely get an accountant.

I have jus set up a limited company with my husband and our accountant is advising and dealing with all that side for us.
I know that some people can sort that themselves but for my piece of mind I would rather pay and make sure it is done properly.

Good luck.

DCodd

Remember when you do your calculations that the Company is liable to pay currently 12.8% employers NI contibutions on top of your personal NI.

nickc25

Ive spoken to an accountant yesterday and he is my former employers accountant (I left there 9 years ago) so know he is good. I think overall I would be worse off being a Ltd company in terms of paying NI and taxes and having to pay £500 per year for accountants fees too as at the moment I do all that myself as it is fairly simple to work out income vs outgoings = profit.

He said to pay myself a wage every quarter and then the rest as dividends. I mean I might only earn £10k a year or might be £20k or £30K, just depends on how it all goes. I think it is something to look at in the future though.

The thing I was thinking of the protection it gives and also the credibility of being a Ltd company too but at the moment it looks like more hassle than its worth I think.

Soubrette

Don't forget the other advantage of having a limited company is that you are not personally liable for any debts or action taken against the company.

You and the ltd company are separate legal entities.

Sou

nickc25

Soubrette wrote: »

Don't forget the other advantage of having a limited company is that you are not personally liable for any debts or action taken against the company.

You and the ltd company are separate legal entities.

Sou

I wont have any debts.. The only issue is if someone sued me for loss of earnings or something, but that is a very tiny possibility. That was the main reason for wanting to do it along with being more credable.