Freelance - setting up a LTD

[alexthepenguin]

Hi – first time posting here.

I have a full time day job and I have been doing some freelance work on the side for a few years now. I’m a higher tax payer and after some calculation I have decided to set up my own ltd for my freelance work.

My freelance work is on a contract and I invoiced the client for my service twice a year. My turnover is expected to be between £5k - £10k a year. There is minimal bookkeeping. My question is if I can do the accounting myself or would I need an accountant? Obviously my preference will be to do it myself given I'm not making that much on my side hustle and micro-entity accounts don't seem too daunting. But if there's value added using an accountant I'm happy to consider it. (Recommendation welcome)

Separately I’m hoping to set up my partner (not married) or my mum (retired) as a shareholder and make use of their dividend allowance. This will be freely given to them and I will remain the sole director of the company. Is this structure legal?

[NotAllThere]

Probably you can do the accounts yourself. Many people do. Since you're working a sole trader now, IR35 is unlikely to be an issue, but you need to be aware of it.

For settling shares on your mother and partner - probably you can't. https://www.qdoscontractor.com/tax/guides/section-660a

[alexthepenguin]

Thanks - yup aware of IR35.

If they are not sending back the dividend to me, would that not be compliant? I'm not paying any less tax as a result so I'm not personally benefiting. I'll give this a bit more thoughts and research... would alphabet structure be the best way if I want to go down this route?

[NotAllThere]

According to the link I posted, alphabet shares make it even more a red flag. I strongly suggest you take professional advice in your company formation, even if you do the yearly accounts yourself.

[Lance]

Thanks - yup aware of IR35.

If they are not sending back the dividend to me, would that not be compliant? I'm not paying any less tax as a result so I'm not personally benefiting. I'll give this a bit more thoughts and research... would alphabet structure be the best way if I want to go down this route?

for less than £10k just pay the tax

[alexthepenguin]

for less than £10k just pay the tax

Yea that was I have been doing for the last few years but this year it would push me over to the 60% marginal tax trap and I have maxed out my pension allowance...

[northernladuk]

There used to be a rule of thumb that anything under 30K there was no benefit to running a LTD but that didn't include a full time job as well so that skews it somewhat. For sub 10k I'd be surprised if there is enough reason to set up a LTD. There are still some costs attached to that and as simple as it is still the possibility of screwing it up.

Fair play trying to avoid as much tax as possible but I think I'd be with Lance on this one.

Ring round a few accountants and see if any are daft enough to give you your answer in an initial consultation about your situation.

[Fred Bloggs]

for less than £10k just pay the tax

Sorry, I really disagree. I run a side hustle Ltd company. I pay everything that comes into the company straight into my SIPP. I suggest that is by far a better idea than paying more than 40 per cent tax on the side hustle income. If the OP already pays higher rate tax then he/she doesn't really need to spend the side hustle income. Much better to use it to bring forward retirement instead. With just a few invoices a year, there's absolutely no need for an accountant. In my opinion, as long as you keep things in the company as simple as possible and use one of the really very good cloud book keeping solutions you will be fine. Download and read the HMRC guidelines on corporation tax etc..... Everything is written down that you need to do to run a nano-compay.

[Fred Bloggs]

Yea that was I have been doing for the last few years but this year it would push me over to the 60% marginal tax trap and I have maxed out my pension allowance...

OK, my suggestion a few minutes ago won't work because of already maxxing out the pension to £40k. Just start a company and sit the money in there until there's a better time to use it for something. Paying 60% tax voluntarily is insane.

[Lance]

Sorry, I really disagree. I run a side hustle Ltd company. I pay everything that comes into the company straight into my SIPP. I suggest that is by far a better idea than paying more than 40 per cent tax on the side hustle income. If the OP already pays higher rate tax then he/she doesn't really need to spend the side hustle income. Much better to use it to bring forward retirement instead. With just a few invoices a year, there's absolutely no need for an accountant. In my opinion, as long as you keep things in the company as simple as possible and use one of the really very good cloud book keeping solutions you will be fine. Download and read the HMRC guidelines on corporation tax etc..... Everything is written down that you need to do to run a nano-compay.

on <£10k revenue, with the ongoing costs of running a company (it's more than just an accountant) is it really worth it?
If you're not willing to pay the tax I'd suggest it's not worth doing the work at all. This is chicken feed.