Was going sole trader the right decision

Legacy_user

Hi,

I have a second job that pays ok with a handful of clients I consult for.

So I have a business bank account for a sole trader, HMRC are notified etc and invoices flowing.

However, I am not sure I am being as tax efficient as possible.

To give you a bit of background, I have no stock, no costs except mobile phone, home office and broadband (and a few small misc items less than £100 a month). All my customers are big companies with VAT registration etc (Well, the UK based ones at least).

As a sole trader I have blown through the Small Earnings Exception within 8 weeks. Would a LTD company be any better ? I am quite happy to leave the money in the bank and then just take a dividend every 6 months or so.

I am not an accountant, but the books are so trivial, its like bill customer x for y hours consultancy. It's all virtual as well. There isn't even really a lot of phone calls either, maybe £10 a month.

Any thoughts welcome.

sequence

What advantage do you think you would get by going LTD ?

System

Hi,

As I see it, I would only pay 20% tax on the dividend for a start. That is probably worth a few thousand. Also it limits my exposure to anything going really bad.

Lastly, I think (and this is subjective) but businesses tend to prefer dealing with Limited companies.

On the flip side, I need no credit, I have no employees so it is very straightforward.

Lomast

13000 wrote: »

Hi,

As I see it, I would only pay 20% tax on the dividend for a start. That is probably worth a few thousand. Also it limits my exposure to anything going really bad.

.

To be honest if you are talking about saving that sort of money i would of thought it would be worthwhile to spend a bit with an accountant and get some proper tax planning advise

Mistral001

13000 wrote: »

Hi,

As I see it, I would only pay 20% tax on the dividend for a start. That is probably worth a few thousand. Also it limits my exposure to anything going really bad.

.

Going Ltd only limits your responsibilities with regard to the business getting into financial difficulties. Going by what you have said that is unlikely since you have few overheads and no stock. So as far as I can see your exposure to "anything going really bad." will not really change by going Ltd in your particular case.

paddyrg

20% on the dividend but you still pay corporation tax, the gap isn't as huge as it sounds. Also, you'll be spending a good extra grand a year in accountancy fees for your year end, might affect those numbers too.

InsideInsurance

You say your UK clients are all VAT registered then voluntary registration for flat rate VAT may be sensible given your low cost base.

A limited company may be more tax efficient for you but remember that you've already paid corporation tax (20%) before the dividends come out on which you are potentially taxed again (20%) if you are a higher rate tax payer. Therefore the real saving is more around NI than tax.

I agree with others that you need to see an accountant with all the details of your incomings, given this is a second job, and take their advice on what is best given your circumstances and plans.