Sole trader vs Limited from a tax perspective

**northernladuk** · 4 October 2024, 08:56

For a start most agencies and clients won't take on sole traders. They are on the hook if you don't pay taxes I believe so will shy away from it and with outside gigs so thin on the ground you don't want to be giving them any reason to pick the next person over you.

I don't see anything about pensions in those calcs and for a year those expenses look a tad low (but I am used to staying away/commuting).

Ring a friendly accountant with the promise of business if you can have 15 mins with them to go over the numbers for you.

Every article I can see still says LTD is more efficient over 20k a year.

**Untouchable1** · 4 October 2024, 09:22

I ran the numbers again with higher expenses and pension contributions. Increasing expenses doesn't make a difference from a tax liability. With no pension contributions, a sole trader is definitely more tax-efficient. (and less costs of insurance, accountants, hassle etc)

However, as soon as you start paying anything towards a pension, it is more tax-efficient to have a limited company.

I'm not convinced by a lot of these articles and always try to run the numbers myself - there's a lot of money to be made by the service industry supporting contractors!

As you say though, it's standard practice and expected by clients to operate from a limited company.

After 5 years permie, it back to contractor land for me and the gov. have obviously changed the game. It's clear my previous contracting tour of duty was done during the golden years!

**malvolio** · 4 October 2024, 10:07

I think you might want to wait until after the budget,. Martha is threatening to wipe out a lot of the tax advantages of current pension planning...

Given that risk and the market in general, I should stick with an umbrella for a while and see how things develop.

Sole trader vs Limited from a tax perspective