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  • FIRST POST
    • Frochr
    • By Frochr 8th Aug 18, 12:32 AM
    • 1Posts
    • 0Thanks
    Frochr
    UK sole trader or limited company
    • #1
    • 8th Aug 18, 12:32 AM
    UK sole trader or limited company 8th Aug 18 at 12:32 AM
    Hi,

    I would be highly appreciative of any accountants advice for the below.

    I am currently a sole trader and making around 80,000 a year from one business, but I am thinking of changing to a limited company as I hear it is better for tax purposes.

    I would like to know what the difference if I change to a limited company in regards to how much tax I will be paying.

    I know that you can benefit from dividends, but what about the 19% coronation tax, how much will I actually be paying in tax if I change to a limited company including the coronation tax and is it worth me changing?
Page 1
    • Dazed and confused
    • By Dazed and confused 8th Aug 18, 7:02 AM
    • 3,330 Posts
    • 1,682 Thanks
    Dazed and confused
    • #2
    • 8th Aug 18, 7:02 AM
    • #2
    • 8th Aug 18, 7:02 AM
    Legislation changed a few years ago and nowadays only the Queen and Ken Barlow are required to pay coronation tax
    • chrismac1
    • By chrismac1 8th Aug 18, 7:52 AM
    • 2,562 Posts
    • 1,547 Thanks
    chrismac1
    • #3
    • 8th Aug 18, 7:52 AM
    • #3
    • 8th Aug 18, 7:52 AM
    Assuming a "standard" model with you owning 100% of the voting rights, you would be 869 better off in the 2018-19 tax year as a limited company, assuming 300 of extra accountancy fees.


    However, if you have a significant other, or adult children, who currently have incomes under the 40% level, the potential savings are a great deal higher than this - an additional 5,764.


    That's because the standard model assumes you pay 32.5% dividend tax on 23,059 of the dividends in your new company. In practice, it is unlikely you would do this as that is a penal rate on top of 19% corporation tax.


    The ideal scenario is to load up your significant other and / or adult children with dividends, which would be at 7.5% tax rate instead. Note that some "HMRC fan" type posters will probably come into this thread telling you how terrible this idea is.


    Well all I can tell you is that set up correctly you don't have to worry about HMRC with this. My own company is set up like this. So are the companies of around 20 clients where I am their accountants. No tax enquiries or even a hint of one, nor should there be as under current tax laws HMRC would have no realistic chance of winning one.
    Last edited by chrismac1; 08-08-2018 at 8:01 AM.
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