Help! Sole trader switching to a Limited Company. Is it really tax efficient?

Sam3007

Hi all, 
I have been a sole trader for more than 5 years and my net income has been steadily increasing, and so has my tax.

My net income will be around 30K this year with around 5500 for income tax and class 4 and 2 NIC (I have used an online tax calculator for self assessment)

I have been advised to registered as a limited company as it is more tax efficient
 
I have read that the best way is to pay myself £11,908 salary as a single owner-director with the £2000 tax free dividends. 
Are my calculations right? 

Gross profit		40000
allowable expenses		10000
My Salary		11,908
Net profit for LTD		18092
Corporation tax		3437.48
remaining		14654.52
Tax free Dividends		2000
remaining		12654.52
Dividends tax		1107.271
Dividends paid to me		11547.25
Total tax (3437.48 + 1107.271)		4544.751
My Net income		23455.25

I have also read that I can claim Employment Allowance if I have 2+ employees with the most tax-efficient salary of 12,570.
My wife is also a sole trader  (part-time). Her annual income is around £8000.
Will I be better off to have her as a Director or an employee in my company with a salary of 12,570 each to claim the National Insurance Employment Allowance and she can continues her sole trader work?

Any help would be appreciated. 

regards

Savvy_Sue

You might get a very general answer here, but the only reliable one will come from your accountant, who knows your business, has full details of your and your wife's income, and can explain their workings.

Who has advised you so far? If it's your accountant, ask them to explain anything you haven't so far understood.

Sam3007

Savvy_Sue said:

You might get a very general answer here, but the only reliable one will come from your accountant, who knows your business, has full details of your and your wife's income, and can explain their workings.

Who has advised you so far? If it's your accountant, ask them to explain anything you haven't so far understood.

I was discussing pension in another thread here and I was told about company pension contributions to directors. I did some research on the internet about pros and cons of a limited company with one or two directors and what I understood is that it is tax efficient if the net profit is more than 25K. I have approached Cruch online accountants as they offer free consultation and they confirmed that I will be better off with a LTD company but they did not want to go into details before I sign up for one of their packages. I feel hesitant to switch before knowing more details beforehand. 

tacpot12

I'd talk to a local accountant to get another view. You might also find they are cheaper than an online accountant, and being able to pop in and sit down to discuss anything that you don't understand might be valuable.