Limited Company or Self-Employed?

meastwood

Sorry I realise this has probably been asked a million times before!

I'm employed full time, but am slowly starting a side-business doing videography and hoping for it to eventually take over. I ahve a few questions.

Firstly, as an employee starting a side business - am I better off going down the self employed route or registering a limited company?

I don't want to be taxed loads and my yearly income for the part time business will be quite low to begin with.

I do all the work myself, but eventually might hire an assistant from time to time on a freelance basis.


Secondly, if I am employed full time and paying NI already, do I still have to pay extra NI contributions through the business and if so is it a significant amount?


I don't want to be worse off and paying more NI etc. because I've started a side business so what is the best option in terms of taxation?


I hope that all makes sense.

Thank you.

PlutoinCapricorn

The standard advice is to start out as a sole trader and incorporate only if and when you earn enough to make this advisable tax wise. This applies even more to people who already have PAYE employment and using freelance earnings as an extra.

You need to pay Class 2 NI if your freelance earnings are over a certain limit - this changes each year but is around £5k.

Mistral001

Unless you are presenty earning in the higher tax bracket and/or perhaps have a spouse who is not working then few tax advantages in going ltd. Lots of disadvantages such as, having to put details of finances of company in public domain every year and additional admin costs , though there are some here who will tell you that it cost you only a few quid and you can do it in 10 mins.

[Deleted User]

Self employed, offset any losses against your PAYE :-)

Annisele

I'd be one of the people who says going limited does only cost a few quid, and you can do it in 10 minutes :-)

Having said that, I still agree with the other posters. It's usually better to start off as a sole trader and incorporate later if you feel you need to.

There are circumstances where you're better off limited from outset. I set up a limited company for two reasons: I was doing something where the limited liability part was important to me; and none of my potential clients were prepared to deal with a sole trader. (I'm not saying those are the only reasons to incorporate, they were just my reasons).

From a tax perspective, it can be possible to save money by going limited - but on a small turnover the costs of being limited are likely to outweigh any tax advantages.

Is there anything in your employment contract that prevents you from working for yourself/another business? If there is, better to sort that before your employer discovers you've set up on your own.

CKhalvashi

Mistral001 wrote: »

Unless you are presenty earning in the higher tax bracket and/or perhaps have a spouse who is not working then few tax advantages in going ltd. Lots of disadvantages such as, having to put details of finances of company in public domain every year and additional admin costs , though there are some here who will tell you that it cost you only a few quid and you can do it in 10 mins.

Now we're approaching £80m t/o, I'm seriously considering returning to self-employment, as the £65000 + VAT audit costs are really putting a sting in the budget.

Then there's the privacy issue, of which I'm still using a friends apartment in Georgia as my 'residence', and lovingly having everything scanned, uploaded, emailed etc.

OP, are you thinking about purchasing £100k of equipment, or renting? You would be better off as Ltd if it's the first, for tax reasons, than if you were renting equipment. I work in entertainment, and you can spend £100, 150, 200k without thinking about it, so take this into consideration.

CK

amcg100

Class 2 contributions are only £2.65 per week so hardly worth bothering about. The main advantage of being limited is that if things go wrong your personal assets are safe, whereas as a sole trader your house and everything else is at risk. Obviously you can offset this risk with liability insurance.

Suarez

Annisele wrote: »

From a tax perspective, it can be possible to save money by going limited - but on a small turnover the costs of being limited are likely to outweigh any tax advantages.

What are the costs of being a Ltd Company in comparison to a sole trader?

ChiefGrasscutter

assj wrote: »

Self employed, offset any losses against your PAYE :-)

The I.Revenue are wise to that one.
They "close down" self employments where the sole objective seems to be to offset the losses/allowable expenses against PAYE.

Mistral001

Annisele wrote: »

and none of my potential clients were prepared to deal with a sole trader. (I'm not saying those are the only reasons to incorporate, they were just my reasons).

From a tax perspective, it can be possible to save money by going limited -
.

What reason do your client give for this, if you do not mind me asking?

gb12345

Mistral001 wrote: »

What reason do your client give for this, if you do not mind me asking?

It is very common when you are dealing with large companies.

My wife has been in a similar situation providing translation services for some financial services companies.

They don't give a reason, they just say "we won't deal with sole traders".