[Closed] Running a Ltd Company as a Side Business

Step 1, check your contract.

There’s no conflict with my main job, the 2 fields are entirely unrelated.

Very often there will be clauses that prevent you from owning over a %age of another company, or doing work for _any_ other party.

Thanks Jeff, good point. I've already asked the question and it's OK providing there's no impact/conflict on my main job

I've been self employed for years and stopped using a separate business bank account about 5 years ago as my income from sales comes in big lumps 2 or 3 times a month. Expenses are personal bank account, credit card or cash. Absolutely no difficulty in accounting for all income and expenditure for tax purposes even though I have several separate income streams. And if you're making less than I think £1000 a year HMRC regards it as a hobby and it's tax free.
I do my own self assessment and declare all income and expenses using the easy peasy HMRC web service.

You can't file your own ltd co accounts, has to go through an accountant afaik

It might be simpler to set up as a sole trader in the short term until the business is established. You can claim relevant expenditure against taxable income as per a limited company.

bikerevive - that's wrong; there is no requirement to use an accountant.
wombat - based on your post, it should take 15 minutes to file accounts and corporation tax return if applicable - once you've got companies house web filing access and passwords etc sorted. You will need a government gateway account/password for HMRC.

@ Bikerevivesheffield didn't know that, thanks for the heads up.

Looks like sole trader as a side business is the way to go for now, can always change later if necessary.

Thanks @Frankconway that sounds comforting, will explore further.

wombat - if you're in any doubt, call companies house.

What's people's preferred method of submitting a self assessment for this kind of thing. I've done a few myself but always felt nervous and deferred to an accountant the last few years but not convinced I'm getting value for money. Was thinking of using one of the accounting apps but don't know anyone that's used them.

I just do my own. I've spent a bit of time reading the guides on the .gov website which are pretty explicit about what can and can't be claimed. I keep a pretty detailed spreadsheet of spending and income then transfer the numbers to the online form at tax time. Tbh the spreadsheet is useful to monitor general spending anyway and filling out the self assessment online is easy if you have the numbers to hand. I'm only a sole trader, not ltd, and below vat threshold so it is at the easier end

deferred to an accountant the last few years but not convinced I’m getting value for money.

I was once told that if your accountant isn't saving you more than they are are costing then you've just outsourced your book-keeping, not paid for an accountant.

I guess it depends on how complicated your affairs are though...

We’ve had our own ltd co for a few years and my wife does all the accounts and finance including VAT which is the worst bit and you won’t be needing that. We’re under the threshold ourselves but a foreign customer insisted as they have no threshold over there and couldn’t get their heads round it.

You don’t need an accountant for any of this but it does take time and effort. For the small sums you’re talking about I would probably just do it on a personal level and only start to think about making it official if the profits are significant.

If its going to be relatively small amounts of money in the first few years, then Sole Trader seems more appropriate than Limited co. Bunch easier

Other consideration:

You and your personal assets are at risk under soletrader and partnership vehicles, if things go awry. Might not be the case here but you never know if uninsured small scale...

Limited entity does what it says on the tin, you only lose what is in the business and your share capital. Unless negligent.

As Frank said, you would be a micro entity and don’t need an accountant.

If you set up a NatWest business bank account, you get free bookkeeping/accounting software call FreeAgent.
It’s very simple to use, tracks your bank accounts and automates lots of tasks, but the big thing is that it can produce and file your end of year accounts.

I've been Sole Trader alongside employment for 15 years.
At one stage I was employed, sole trader and Ltd. Co. Director for 6 months.

Ltd.Co was big enough to be VAT registered, and I did pay an accountant.

Self employment I used TaxCalc for years. The last 5 years though I've used QuickBooks Self Employed with Property module (landlord). It does everything I need, particularly if you keep records & scan in or upload any receipts as you go. It connects to the bank account I have (Nationwide). It's connected/stores all my online HMRC account information. It makes tax returns a doddle - coffee, check everything is up to date, read the return and press 'submit'.

My employer is used to getting an odd tax code a few weeks into each tax year.

As @ruddy says, consider also the liability aspects of Ltd vs sole trader. Depending on your line of business they might be a bigger reason to go Ltd, over and above admin or tax considerations. Also, once you've don't your tax return etc once, year 2 and on should largely be just a rerun of the same spreadsheet. If you expect to grow it might make sense to put in place the basic structure now rather than changing structure later.

Limited entity does what it says on the tin, you only lose what is in the business and your share capital. Unless negligent.

While this is strictly true, the chance of a new micro business being able to take on loans or leases without a personal undertaking from the director is effectively zero. Which somewhat limits their attractiveness to very small businesses.

For the sort of revenue you are talking about sole trader is the way to go. You can still claim capital allowances for kit needed exclusively for business use regardless of legal structure.

you don't even need a separate business bank account, although you might find it easier to manage income/expenditure if you do.

if you are self employed you'll need to complete a self assessment tax return each year - which is straightforward. HMRC run courses for newly self employed which go through record keeping , allowable expenses etc.

if you're a limited company you can't just "keep money in the business" - if it generates a profit you'll need to pay tax, either income tax as a result of drawing the profit as salary, tax on dividends or corporation tax.

Check your local LEP or Council. They'll almost certainly have a "business start up" programme offering free advice.

How easy is it to file Ltd Co accounts yourself? Realistically would I be foolish to think I can do this? I’m likely to be seeing turnover of under £1500/year in the first 2/3 years so employing an accountant to do this for me may well absorb much of my profit I suspect.

The accounts aren't difficult, but you'll need to do a corporation tax return and a personal tax return. For that kind of turnover I'd be tempted to not bother with the Ltd Co and just treat myself as a sole trader and claim the £1000 trading allowance on your personal tax return (that's what MrsIHN does for the side-job stuff she does).

I could declare to HMRC that I’m doing some self-employed work and put it through my personal tax return but that wouldn’t allow me to keep business money in my accounts without paying tax on it.

I don't quite get what you mean here, but if you do set up a Ltd Co then that will need it's own bank account, you can't run it from your personal account. And don't forget you'll pay corporation tax on whatever profits the Ltd Co makes.

You and your personal assets are at risk under soletrader and partnership vehicles, if things go awry.

your personal assets are still at risk as a director of a ltd company as you can still be sued for any alleged or actual breach in your duties as a director or officer of the business, granted it unlikely with a micro entity, but ltd co status doesn't completely protect your own assets