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Emma Stevens Accountancy

Chartered Accountant in Hemel Hemstead, Chesham, Kings Langley, Berkhamstead, Hertfordshire

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Starting a new business – sole trader vs limited company

01/04/2015 By Emma Stevens

As a new business one of the first choices faced is whether to run as a sole trader or a limited company.

Sole trader

You maintain complete control over the business and all profits after tax belong to you. However, there is no legal distinction between yourself and your business, so you will bear legal and financial responsibility as an individual.

You must inform HMRC of your new business activity on commencement of trading. You will then be required to complete and file a personal tax return detailing your income and expenditure for the year. Tax will be charged at 20 per cent of profit after deduction of your personal allowance and you will also have to pay nine per cent class 4 National Insurance Contributions.

Limited Company

A limited company is a separate legal entity from its directors and shareholders, therefore limiting liability should the business face any financial or legal issues. However, setting up and running a limited company is more restrictive and requires more administration.

A limited company can be more tax efficient.  The company’s profits are taxed at 20 per cent and the profit belongs to the company. You as the director are paid as an employee and then in addition can withdraw dividends as a shareholder. These are taxed at a more favourable rate on the individual. You will still be required to complete a personal tax return.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

  • I’ve started to work self employed. What do I need to do?
  • How do I pay my Corporation Tax?
  • How do I pay my Employer’s PAYE?
  • How do I pay my personal tax return?
  • How do I pay my VAT return?
  • When is my personal tax return due?
  • Why do I need to pay a payment on account?

Recent Posts

  • Budget 11 March 2020
  • 2018 Budget Summary
  • 2018-19 Tax Tables
  • Spring Statement 2018
  • Did you know?…… Use of home as office
Emma Stevens Accountancy
14 High Street,
Bovingdon,
Hertfordshire,
HP3 0HG
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01442 831462
info@emmastevensaccountancy.co.uk
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