Advantages of going Ltd?

[GregFin]

Tweet

Hi all,

I currently work as a sole trader, which covers my freelance design work and my small affiliate projects. I've been looking into forming a Ltd company as it seems like a better structure for future development, though that could just be the perceived image I have in mind!

What are the advantages of going Ltd? I see figures being thrown around on other forums that suggest it's not worthwhile until you reach a set income per yr (£60k??) but have seen stats on another site to say it's worth doing at lower income levels for tax reasons? Can anyone shed any light on this?

Thanks in advance,
Greg

[ian]

If you don't need to take all the cash from your income in the same year, you can let the cash build up in the business at 21% corp tax and take it out tax efficiently over the years that your income doesn't hit the 40% tax band. As a sole trader you're exposed to the 40% tax rate on your earning with no way to drip feed it.

Ltd company allows you to pay corp tax on your profits at 21%, take the maximum amount as salary tax free (£5k ish), plus the rest as a dividend. Up to the 40% tax band you won't be paying any extra tax on the dividend.

HRBS.biz can probably tell you better than I can.

[wonder_lander]

Take a look at the spreadsheet on here Save Tax and National Insurance | Pay Dividends | Company Formation : HRBS.biz | Fixed Fee Accountants | Free Guides | Save Tax | VAT Advice | Self Employment Help