Self Employed to Ltd Company

Sugarloaf

I am self employed but work mainly for one company. They have said that I should become a Limited Company. What are the implications/costs/benefits to me?

Any advice/thoughts would be appreciated.

Thanks

altyfc

I went Ltd. just over a year ago. The main benefit - to my mind - is the tax savings it can offer you. You can keep your earnings in the company, and draw only what you need as your wage (and only get taxed on that). The rest gets taxed at a company rate which is lower.

WHA

There are a couple of threads on the tax savings board that may interest you:-


http://forums.moneysavingexpert.com/showthread.html?t=391854
http://forums.moneysavingexpert.com/showthread.html?t=395240

LittleVoice

I think yesterday's Budget may have affected the tax advantage of different tax rates - but guess it's covered in the boards suggested by WHA.

Sugarloaf

Thanks for your replies, but I think it will cost me more to become a limited company from being self employed. I would have to buy a Ltd company, have the accounts audited once a year. Would I have to be IR35 and then I would have to employ myself and pay both employee and employer contributions. Based on earnings of approx £35k is it worth it? I think it would cost me about £5k in the first year. I wouldn't be able to earn any more money and I can't see how it would save me any?

I'm still confused as to how it would help me? I basically have the option to go Ltd or leave. Any more thoughts would be appreciated. Thanks

PSB_2

I'm doing supply teaching after easter one of the agencies i have signed up with have suggested that i look into becomming a limited company as this would mean paying less tax and i could claim expenses for lunches and travel .Have any other teachers done this or looked into this and know of the benefits and any disadvantages?

linlin_3

You can't just become self-employed or a limited company. You need to phone the tax office and get their leaflet: "employed or self-employed".
Directors of a limited company can, in theory, pay themselves a very small basic salary, thereby minimising NI and (to some extent) tax then once a year they take a dividend. Go see an accountant - get a quote first. Ltd companies can be bought for less than £100 - off the self!

Sugarloaf

linlin wrote: »

You can't just become self-employed or a limited company. You need to phone the tax office and get their leaflet: "employed or self-employed".

I have been self employed for 4 years, but the company I do most of the work for wants me to become limited by the end of the month.

Thanks

LittleVoice

Sugarloaf wrote: »

I have been self employed for 4 years, but the company I do most of the work for wants me to become limited by the end of the month.

Why do they want you to work through your own limited company? Are they concerned that you may be considered their employee? Can you get someone else to do the work you do for them and the company pays you rather than the other person or is it the case that it has to be you who does the work and you can't pay someone else for doing the work instead of you?

Sugarloaf

My understanding so far is that IR 35 was set up specifically to catch a situation where individuals are self employed (but basically employed) the company for which they work do not want the employer/employee responsibilities. I think the deadline is imminent and so to overcome this the company tells the self employed person to form a limited company, as a company cannot employ a LImited company. However, as far as I can see this means that the Ltd company you have formed may then come under the IR35 umbrella. If the company that a self employed person is working for is found by the revenue to be employees the company would be responsible for the Tax & NI going back for 6 years. So yes, the company I am working for must be concerned that we could be deemed as employees and no I couldn't get anyone else to do my job for me.

I am not completely sure of these facts, this is only my interpretation of it so far.

Thanks

BexTech

linlin wrote: »

You can't just become self-employed or a limited company. You need to phone the tax office and get their leaflet: "employed or self-employed".
Directors of a limited company can, in theory, pay themselves a very small basic salary, thereby minimising NI and (to some extent) tax then once a year they take a dividend. Go see an accountant - get a quote first. Ltd companies can be bought for less than £100 - off the self!

Why buy off the shelf, when you can create from scratch easier for £30 +VAT, we used: http://www.company-wizard.co.uk.