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Seems like a lot of people here are basically self-employed under one or the other framework. It looks like my wife and I might be picking up a bit of (joint) work and we are wondering which is the best way to go. It's not a huge amount of money (20k total, ie 10k each) and may be a one-off though we may get similar opportunities in the future. I can't see this sort of thing ever amounting to more than 50k total per year though.
As sole traders/partners it looks like we'll be below the tax threshold with this (even if we get slightly larger contracts in future, a large slice would still be exempt), versus 20% corporation tax and potentially additional tax on dividends (tho the 10k threshold per year may cover it). We'll have minimal expenses to set against profits and they are probably similar in either case. So it looks like the partnership wins on money let alone being easier to run. We'd be doing the paperwork ourselves either way.
Are there others who went down the limited company path on similarly low profits who prefer/regret their choice?
Incidentally, though I realise it might start to look like disguised employment if the same contractee keeps on offering more work, there is no intention or expectation of this. They are just the first ones (or several we've talked to) to have actually come up with anything.
I'd say as things stand theres no pressing reason why you'd go LTD.
Theres also no reason not to change that at any point though. I stayed self employed for quite a long time on much higher turnovers.
My motivation for then switching to LTD was in the interest of working with certain clients where the transparency of being LTD brings a bit of reassurance. But thats with the kind of work where you carry a lot of expense (materials etc) where the client wants to be able to see that you're robust enough to be trusted with it. If you're principally offering service/expertise/labour then theres little risk, in the buyers eye, that you're going to fall over financially just because they've given you a lot of work.
Thanks, that was very much the conclusion I was coming to. Started out thinking that ltd was a good wheeze with the dividend low/exempt tax system. But had forgotten that you start with 20% corporation tax on everything! There won't be a status/risk issue, anything we get will be from people we already know paying for our expertise.
Be aware that depending on your industry many clients will only deal with Ltd companies not sole traders
Maybe industry dependant but I've never had anyone refuse to deal with me as a sole trader in 6 years of trading. Couple of issues with invoices from not being vat registered but easily resolved. Its very easy from a paperwork perspective and I'm not interested in tax avoidance so suits me.
[i]But had forgotten that you start with 20% corporation tax on everything![/i]
Only on declared profits.
So you can pay yourselves each just over £8k pa gross/net, then there are expenses and finally dividends (taxed at 20% - upto £30k ish).
Would want to be Limited without the help of our Accountants though.
We were partnership now Ltd due to client expectation. The only advantage I see now is paying tax at one point, whereas self employed you paid tax for your current year and on account for the coming year. I always hated that.