Limited company, sole trader etc???

Laety2511

Hello,
My husband who is working full time, has been asked to help a friend as a consultant doing few hours a week for a few months.
We are not expecting any income to be more than 1/2K
It is most likely be a one off for a project he has so what to do in terms of getting paid?.
Would it be better to be sole trader or setting up a ltd company? Also, if Ltd, how does it work if he wants to get a small salary and the rest as dividends ? as he is already on a 40% threshold.. then if he is not doing anymore work does he needs to close the company or can he keeps it? does he needs to do annual returns to the company house?
Sorry he asked me to look into it and im very confused!
thank you very much

InsideInsurance

£2k per month or total?

Assuming its a one off and its £2k total then you can get away with doing a declaration to HMRC for it rather than doing self assessment - though SA can be useful as when I was an employee and higher rate tax payer I always got a rebate despite earning a few thousand a year as self employed (think it was linked to pension contributions)

I wouldnt even consider a Ltd for £2k

Transformers

What research have you actually undertaken - as well as asking on here?

Look at the HMRC website regarding taxation, speak to an accountant if you want formal advice.

You need to put some effort in yourself rather than expecting everything to come to you.

Once you've researched, then come back with specific questions.

http://lmgtfy.com/?q=uk+taxation

http://lmgtfy.com/?q=Setting+up+a+company+in+the+uk

LittleVoice

Laety2511 wrote: »

Hello,
My husband who is working full time, has been asked to help a friend as a consultant doing few hours a week for a few months.
We are not expecting any income to be more than 1/2K
It is most likely be a one off for a project he has so what to do in terms of getting paid?. Send an invoice on the basis of the terms agreed with his client - eg monthly for £x, payment within 14 days.
Would it be better to be sole trader or setting up a ltd company? If really only for part-time and not long-term, simpler to be self-employed as a sole trader. Also, if Ltd, how does it work if he wants to get a small salary and the rest as dividends ? as he is already on a 40% threshold.. Simplest would be for 20% tax to be deducted at source for his pay and account for the rest via his self assessment return. May not be worth dealing with corporation tax in relation to paying dividend. Others may not agree. then if he is not doing anymore work does he needs to close the company or can he keeps it? No need to close - make sure memorandum and articles allow for wide range of activities. does he needs to do annual returns to the company house? Yes - for as long as the company exists.
Sorry he asked me to look into it and im very confused!
thank you very much

My general view is that setting up a private limited company is going to be more trouble than you want. If his earnings from self-employment increase significantly, you can review the situation.

Laety2511

I actually just had a quick chat with a local accountant and she also recommended to go through the sole trader route as it would only be a very small amount for the year (2k for the year) and do a SA at the end of the year, which I can do myself.
I also found some instruction on HMRC website (so yes Transformer, I am also looking and not just waiting)
Trying to get straight answers has been a but difficult as a lot of accountancy websites I found where vaguely answering questions, and then of course prompted you to register with them for more details. I am just a little overwhelmed as it something that would need to be set up quite quickly and did not really want to make bad decisions and pay too much tax if we could have avoided it. The replies above have been very helpful thank you very much!

Makkusu

Hi Laety2511,

If you're looking at £2k for the year then setting up an Ltd should not be an option at all, unless you're 100% confident of incorporating the company, filing an annual return, financial statements, CT600, closure accounts, DS01, then the majority of those funds will be eaten up by accountant fees.

You will almost certainly want to go sole trader, and pay an accountant to file your self-assessment tax return for you.

Sole Trader: You'll only have to pay tax on profits at your typical rate.

Ltd: You have several taxes to consider, a higher rated salary isn't necessary in some circumstances, the remainder can be made up of dividends, or, if you're eligible, capital distribution, assuming you'll close the company (scope for Entrepreneurs Relief @ 10% perhaps).