AndyKent
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Registered: 3rd Sep 05
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Been thinking of setting up a business/company for some time (I messaged Robbo about this over a year ago  ) but have never taken it any further than planning in my mind.
Basically, at this point I'm not looking to actually operate as a business, merely own one. Basically, I have been doing more and more photography lately, most of it on the side, some paid and some for favours. Now a bit of news at my main employment has prompted me to think about taking the idea further.
So, as it stands I work full time (and intend to stay that way) and obviously earn my wage through that company who pay all NI contributions/tax usual. I've got my own reasons for starting a company which I don't really need to explain, but at this stage I'm not actually planning on pushing to earn money through business, just use it as a way to tidy up any work I do on the side.
Basically my question is, are there any tax advantages of being either self-employed or running a limited company whilst earning a wage elsewhere, and if so which is better?
For example, can I legally sink money into a company as a loan, and have the company buy things I would buy anyway and then reclaim tax due to it technically making a loss? Or doesn't it work like that
Cheers 
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DizzyRebel
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Registered: 2nd Jan 09
Location: Lincoln
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Only real benefit going ltd is that if it goes belly up, any creditors cant chase you for the money. Although i cant see a photography business being rife for debt. It costs to go ltd too.
Also you cant just buy day to day items and them claim them back as tax at the end of the year. The ir will investigate you and you will get stung with a massive tax bill lol.
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John
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Registered: 30th Jun 03
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There are massive benefits to ltd if you are making enough money, not just that you can't be chased for money. I don't know the ins and outs though.
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DizzyRebel
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Registered: 2nd Jan 09
Location: Lincoln
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quote:
Originally posted by John
There are massive benefits to ltd if you are making enough money, not just that you can't be chased for money. I don't know the ins and outs though.
I should know, i went on a course for this but i cant for the life of me remember. I do remember the only key point that caught my attention was not being held liable for debts. Im pretty sure cosmo will explain thoroughly though.
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BarnshaW
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Registered: 25th Oct 06
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LTD has limited liability meaning you could only really lose what you put in
PLC is a private company and if it goes tits up you could end up losing your house etc to clear debts.
less paperwork is involved in setting up a PLC then an LTD.
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AndyKent
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Registered: 3rd Sep 05
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Thats what I'm asking really. If I was a sole trader (or limited company) what kind of tax advantage might I be able to gain?
To clarify, I'm likely to register as either one or the other regardless of the answer to the question, just want to know where I stand on things like this legally.
Also, I don't plan for the company to go into debt (unless I lend it my own money for whatever reason) so I'm not really fussed about the liability part at this stage (even though I know its the main reason you would choose one over the other).
[Edited on 08-10-2009 by AndyKent]
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DizzyRebel
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Registered: 2nd Jan 09
Location: Lincoln
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quote:
Originally posted by AndyKent
Thats what I'm asking really. If I was a sole trader (or limited company) what kind of tax advantage might I be able to gain?
To clarify, I'm likely to register as either one or the other regardless of the answer to the question, just want to know where I stand on things like this legally.
None, you still have to pay NI and you will still be taxed at the same rates as an employed person would be. The only benefit is you can choose (within reason) what you could buy on the company you could write off as expenses. The other benefit is if you do cash work you dont have to declare it thus it will be tax free.
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N16K
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Registered: 4th Oct 04
Location: Belfast, NI Drives: Corsa D SRi, Tuned Cooper S, B
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ltd is safer for the individual, if possible.
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Hammer
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Registered: 11th Feb 04
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As has been said there are massive benefits of being a limited company if your turnover is at a certain level. I joined a small self employed company 4 or 5 years ago, it grew big enough within a year to become limited at around about the 45k profit mark for what it's worth and that was based on the accountants opinion who was a former tax man.
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Matt L
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Registered: 17th Apr 06
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sole trader = personal tax return on any money you make totally.
limited company = personal tax return + corporation tax (tax on business profits)
probably loads more im just to lazy to think at the moment and tbf i should know more about it all seen as im doing tax at the moment
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AndyKent
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Registered: 3rd Sep 05
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quote:
Originally posted by DizzyRebel
quote:
Originally posted by AndyKent
Thats what I'm asking really. If I was a sole trader (or limited company) what kind of tax advantage might I be able to gain?
To clarify, I'm likely to register as either one or the other regardless of the answer to the question, just want to know where I stand on things like this legally.
None, you still have to pay NI and you will still be taxed at the same rates as an employed person would be. The only benefit is you can choose (within reason) what you could buy on the company you could write off as expenses. The other benefit is if you do cash work you dont have to declare it thus it will be tax free.
I'm pretty sure I can avoid NI by making a small earnings exception as income with be less than £5700 (or whatever the figure is). Presumably I can't be taxed on earnings if I or the company doesn't make a profit?
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Matt L
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Registered: 17th Apr 06
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quote:
Originally posted by AndyKent
quote:
Originally posted by DizzyRebel
quote:
Originally posted by AndyKent
Thats what I'm asking really. If I was a sole trader (or limited company) what kind of tax advantage might I be able to gain?
To clarify, I'm likely to register as either one or the other regardless of the answer to the question, just want to know where I stand on things like this legally.
None, you still have to pay NI and you will still be taxed at the same rates as an employed person would be. The only benefit is you can choose (within reason) what you could buy on the company you could write off as expenses. The other benefit is if you do cash work you dont have to declare it thus it will be tax free.
I'm pretty sure I can avoid NI by making a small earnings exception as income with be less than £5700 (or whatever the figure is). Presumably I can't be taxed on earnings if I or the company doesn't make a profit?
if you were limited and took 470 a month out of the company you wouldnt pay ni or paye anything above and you start paying.
i really wish my head was with it and i could tell you more but my heads fooked atm
[Edited on 08-10-2009 by Matt L]
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stuartmitchell
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Registered: 24th Apr 04
Location: Kirkliston, Edinburgh
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A lot of my candidates have themselves set up as aLtd company for tax reasons. Costs £70 I think!
Ltd company, offshore account in Zurich - Tax who? lol!
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Matt L
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Registered: 17th Apr 06
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oh also if you go limited you will have to complete accounts and send them to companies house and all that jazz (keep people like me in a job ) but if your a sole trader you dont have to do accounts but you will need the profit/loss to be calculated for your tax return.
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DizzyRebel
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Registered: 2nd Jan 09
Location: Lincoln
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You wont be subject to PAYE NI contributions. NI when self employed is optional, but if you want a state pension when you retire then you have to pay a minimum of 30 years iirc. If you dont then you wont get a state pension. its something daft like £2 a week anyway so you may as well pay it.
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Cosmo
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Registered: 29th Mar 01
Location: Im the real one!
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Fucking at some of the points in this thread. Im half baked and can tell you half of what has been posted in here is shite.
I'll post up my recommendation in the morning when I can go through everything clearly for you, although just to give you a quick insight now, being self employed is a much better option tax wise now given what you have said.
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AndyKent
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Registered: 3rd Sep 05
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Just a reminder than that the activity of either type of business in the short term would be minimal. I'm pretty sure if I could work out double entry book-keeping I could do accounts for free myself tbh. It'd be quite a short document given there would be very little income and expenditure going on. Basically it would be deliberately breaking even.
Out of interest, how much would you/your company charge for a limited companies accounts?
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AndyKent
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Registered: 3rd Sep 05
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quote:
Originally posted by DizzyRebel
You wont be subject to PAYE NI contributions. NI when self employed is optional, but if you want a state pension when you retire then you have to pay a minimum of 30 years iirc. If you dont then you wont get a state pension. its something daft like £2 a week anyway so you may as well pay it.
Given that my main employment is still paying my contributions I think I'd probably be ok without bothering. Every £2 helps
Nice one Cosmo, it'll wait til the morning 
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Cosmo
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Registered: 29th Mar 01
Location: Im the real one!
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Put it this way, We have two companies...
Our bridal business with 5 shops turnover is over £1m (well over tbh), this is Ltd.
Our ladieswear shop is a partnership (basically self-employed) and turns over approx £250k, but as partners we all claim out phone, petrol, other allowances to this company which we cant in the Ltd. We then charge a management charge over to the partnership from the ltd company.
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stuartmitchell
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Registered: 24th Apr 04
Location: Kirkliston, Edinburgh
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Just get paid cash in hand lol
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Tommy L
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Registered: 21st Aug 06
Location: Northampton Drives: Audi wagon
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From what you have said in your original post, you will be better off just being a sole trader for the time being. If it does take off and starts to grow, then look in to making it a LTD company.
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Cosmo
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Registered: 29th Mar 01
Location: Im the real one!
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quote:
Originally posted by corsa_tomtom
From what you have said in your original post, you will be better off just being a sole trader for the time being. If it does take off and starts to grow, then look in to making it a LTD company.
Pretty much sums up what I'll post tomorrow tbh.
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AndyKent
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Registered: 3rd Sep 05
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Could do that yes, except I have a charity willing to pay me over a grand for work I've done but for some reason say they can only pay to a registered (limited) company else they'll have to pay it through a member of my family who works for them but will take off 40% tax 
If there is going to be no long-lasting benefit though I've got no problem being a sole-trader, just exploring all my options really.
[Edited on 08-10-2009 by AndyKent]
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Matt L
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Registered: 17th Apr 06
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quote:
Originally posted by AndyKent
Just a reminder than that the activity of either type of business in the short term would be minimal. I'm pretty sure if I could work out double entry book-keeping I could do accounts for free myself tbh. It'd be quite a short document given there would be very little income and expenditure going on. Basically it would be deliberately breaking even.
Out of interest, how much would you/your company charge for a limited companies accounts?
if that was to me feck knows he has no set prices i really have no idea how he decides on prices but he doesnt really charge much if what we get given off a client is in some sort of order and basically makes out life easy
for example 1 client who basically brings us a box of mixed up reciepts = around 3k+vat (a pretty busy company therefore takes pissing ages to do it  )
another client who is small and had all his stuff in order easy to follow be around £300-500+vat possibly
totally depends on how much work is involved
the only thing i do know is tax returns are £100-£110+vat
[Edited on 08-10-2009 by Matt L]
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Robbo
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Registered: 6th Aug 02
Location: London
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agree with cosmos first pot, some nonsense in here
best bet (i cba to explain myself right now) is to go to wikipedia or summat
key benefit of being a limited company is you get limited liabiolity to losses, damages etc. limited to what you invest. hence "limited" company
google will help
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