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Should I set up as a Sole Trader for my new business?#AskAMS

Not necessarily, a Limited Company can result in you paying less tax and - while a Company owner might lose their business - a Sole Trader (self-employed) can lose personal assets as well!

See video HERE!

If profits are below about £12,570, acting as a Sole Trader makes very good sense from a tax. And even on profits above that, maybe up to £25.000/£30,000 the tax savings of a company aren’t necessarily big enough to justify some of the extra expenses of running a company. A sole trader pays income and National Insurance at 20%+9%=29%, whereas a Limited Company owner pays Corporation Tax and dividend tax which equate to about 25%. But this saving of 4% tax on lower levels of income is not that significant. However, the tax advantages of a company do become more compelling when profits reach about £30,000. 

And, when profits rise above £50,270, Limited Company owners can reduce their personal tax from the higher rate of 40% to as little as 20% - by keeping profits in the company until a later tax year – or by possibly making a spouse a shareholder in the Company. On profits of £80,000, this might save about £8,500 Income Tax.


AMS Accountancy Swindon and Wiltshire

AMS Accountancy Ltd

AMS Accountants in Swindon provide a complete accountancy service for small businesses in Wiltshire and a monthly accountancy service for contractors throughout the UK.

Delta 606, Welton Road, Swindon, SN5 7XF

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