I am setting up a new company. Will I be best to set up as a Ltd company or a sole trader?

Question

My services are nil vat. I suppose I am wondering from a taxation perspective. I will need to purchase a car. No employees except myself.

Answer 1

Sole business will be fine.

Answer 2

Think hard about this!! Remember, as a Sole trader you personally will be accountable for any loss or problems that might occur.

Answer 3

Depends on your turnover. If you expect to turnover £60K or more then you have to register for VAT anyway - it's the law. As a sole trader if it all goes wrong (lets hope not!) you are personally liable for any debts or losses. As a Ltd company your potential liabilities are LIMITED to the assets of the company. Speak to an accountant (get a reccommendation, not just off internet!) and do more research. There are free courses available and they are actually rather good!

Answer 4

Don't buy a car, a van is much better tax wise. If you have to buy in products on account , it's best to be a limited company.

Answer 5

If you setup as a ltd company, you can be paid a wage of 5400 a year and take the other profits as a dividend which will save you about 8% in class 4 National Insurance over a sole trader on any profits above 5435.

You could buy a car for the company but this would be a benefit in kind and you would be taxed (and the fuel) on this but if you buy the car yourself and change the company 40p a mile for the first 10,000 miles(25p after that), you pay for the fuel, tyres etc, this may work out a little better for you depending on the mileage you do.

The accountancy costs may be higher for a ltd company and you have to submit accounts to companies house but your accountant could do this as well, best to shop around for prices as the can vary a lot.