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UK Tax Advice?

Discussion in 'Freelancing' started by Joe F, Jul 27, 2015.

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  1. Do any UK freelancers of self employed people have any experience of setting up as limited company?

    Its a way to pay less tax, by paying yourself a dividend, rather than a salary:

    Not sure if its worth it for someone on a relatively low salary or not?

    Any experience on this topic?

  2. I had a company set up a couple of years ago, but I later closed it down.

    Setting up a company is simple. You can do it online in minutes for a small fee.

    After I used an online service to set up my company, my accountant handled everything else. If you have a relatively low salary, it is probably not worth it due to the costs of an accountant. If you are approaching the higher tax bracket, it is recommended that you set up a company so that you do not pay the higher rate.
  3. I have done so. Disclaimer: I am not a financial advisor, and this does not constitute financial advice (or legal advice!).

    I did it not because I was earning enough to make it worth my while, but also to protect myself should things go wrong. My way of thinking was I set it up so that instead of me being sued, the company would be sued. The clue in the name is "Limited", as you have a limited liability rather than unlimited liability, the company could only be sued into bankruptcy (which is relatively small), rather than me being sued into bankruptcy (which could be more). I was concerned that if my plugin would

    Yes you pay less tax and you can offset some of your current income against it (so if you are renting, and working from home, some of your rent can avoid tax. I'm not sure if mortgages the same).

    The "Less Tax" comes into force because of how you pay tax. If you're a limited company you don't pay income tax, but instead pay corporation tax. At the moment this is the same amount (20% - but it's being dropped to 18%), but you pay income tax on all the money you bring in, and corporation tax on the profit. As such, you usually would pay yourself a minimum wage (so don't pay income tax), expense as much as you can, pay tax on the rest and then pay yourself a dividend (which you only pay tax on at a higher rate tax).

    The problems is that you have to record a lot more. My accounts from business year one were a mess, so it was a lot of trying to add up things to hopefully get something. And the expense is there too. Most accountants are quite expensive, and you have other business expenses (£10 or so to record the fact you are directors every year). But it's up to you to decide if it's worth it for you.

    So in short - my advice would be speak to an accountant. Most will speak to you for nothing for an hour or so, see if it's worth your while.
    Heather and Kevin Muldoon like this.
  4. Thanks guys. Will definitely speak to an accountant.

    At the moment I don't really have any expenses related to the 'business' so hopefully it shouldn't be too time consuming to track.
    Kevin Muldoon likes this.
  5. Neither did I up until a year ago. Then it became beneficial to expense all the things, to reduce the tax you pay. But your accountant will probably tell you that :D
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