Being employed & running own business - what is the best setup?

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Kamala
Kamala Posts: 12 Forumite
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in Cutting tax
Hi,

My partner and I set up a website that is slowly starting to bring profit. I would like to register it as a business however I'm not sure what the best solution is. We are both working full-time, paying 40% income tax.

We are thinking of Ltd, but I'm not 100% sure how the tax would work (if we pay ourselves would we have to pay the 40% tax on top of that?). Perhaps it would be better to be self-employed?

I would appreciate any advice, especially from people who are in a similar situation.

Thanks,
Kamala

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  • antrobus
    antrobus Posts: 17,386 Forumite
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    Kamala wrote: »
    ...
    My partner and I set up a website that is slowly starting to bring profit. I would like to register it as a business however I'm not sure what the best solution is. We are both working full-time, paying 40% income tax.

    You already have a business. You should notify HMRC.
    https://www.gov.uk/set-up-sole-trader
    Kamala wrote: »
    We are thinking of Ltd, but I'm not 100% sure how the tax would work (if we pay ourselves would we have to pay the 40% tax on top of that?). Perhaps it would be better to be self-employed?

    Find yourself an accountant. Your best solution will depend on your circumstances.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    You are higher rate taxpayers, therefore any income you receive that has not been taxed through PAYE must be declared as you will obviously owe tax on it. You need to register with HMRC right now, not wait to when you think you may want to.

    As for the trading entity, do you actually need the income in cash right now if you are already higher rate taxpayers? That is an often overlooked factor when people ask: Ltd v sole trader...

    For a fledging business which is only "slowly starting to bring profit" you may not want the money now in which case, as advised above, you need to talk to an accountant who can explore your total tax exposure and advise on tax efficiencies accordingly: employment income, savings/investment income, pensions and business income
  • Apodemus
    Apodemus Posts: 3,384 Forumite
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    Accountancy costs can be disproportionate to the scale of the business, so before paying for an accountant, I’d have a chat with one of the free governmental business start-up advisory services. (Who this is will vary depending on where you live, but I would be surprised if there is no business start-up support services where you are).
  • trailingspouse
    trailingspouse Posts: 4,035 Forumite
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    You need to register the business sooner rather than later. It costs nothing.


    Most accountants will offer a half-hour chat for free (obviously in the hope that you will give them the work) - if you make appointments with 2 or 3, and do a bit of homework so that you know exactly what questions to ask, you will find out very quickly whether you need to actually employ one.
    No longer a spouse, or trailing, but MSE won't allow me to change my username...
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