Self Employed or Ltd

[Gulliver]

Hi All,

Currently I am self employed as well as having an Ltd. Which legal form it is more tax efficent to contract through?
Is it good to have both business at all?

I have issues keeping in mind where to put which expense. Because it's the same business. For the sake of ease I throught to close the self employed business and do everything through the Ltd. My accountant confirmed that I would not really lose anything by doing so.

But Is there any benefit of keeping my Self Employed status?

Thanks in advance.

[Sockpuppet]

SE is easier. No IR35. Many agencies won't touch you with a bargepole though.

[Clare@InTouch]

SE is easier. No IR35. Many agencies won't touch you with a bargepole though.

+1

A limited company can be more tax efficient due to the ability to pay dividends, but there's a lot more effort required from an admin point of view. SE is just a tax return - easy & cheap. But you'll be very, very lucky to find an agency that will accept you being self employed as they see it as a risk (if you don't pay your tax, it could be transferred to them).

[Craig@Clarity]

Just to add to Clare's post (2 for the price of 0):

It would also depend on how much you are making in terms of profit that would determine which is the best route including WSPS.

If your profit is creeping towards the higher rate tax threshold mark under SE, you're probably better off through a LTD. Your accountant should be able to advise on the specifics.

One thought to consider is the VAT aspect of having 2 trading entities which do exactly the same trade. Make sure you're not falling foul of any rules and registration limits. Hopefully, you've got this covered off.

[Nixon Williams]

This is why agencies will not touch contractors :

The Income Tax (Earnings and Pensions) Act 2003 Section 44 effectively prevents individuals from trading as sole trader where an agency is involved, as it obliges the agency to treat the individual as if they were an employee, and so are required to deduct PAYE and NIC from any payments due.

Alan

[Scrag Meister]

SE is easier. No IR35. Many agencies won't touch you with a bargepole though.

WSPS

[Gulliver]

Thanks for everyone who commented. I forgot to tick the checkbox to receive email notifications so I thought no one replied!

So to reply to some of the points:

1. Yes, most agencies require to work through a limited company so as long as I do contracting I will need a limited company.

2. However, I'm working towards transitioning from contracting to home based online subscription business. So in this case I would be working for myself.

3. I do not like the fact that the company is not me. Eg the laptop I work on would belong to the company not me personally if I buy it as an asset.

4. My new accountant's contract includes something like they can hold money on a separate bank account on my behalf. It's my money I want to hold my money only.

5. Before contracting I was self employed for 3 years and I didn't have to pay any tax nor did I have to pay for an accountant.

6. Seems like Ltd is giving out control and spending more money. The concept is a bit foreign to me as the Ltd entity owns basically everything and I'm a shareholder.

7. May want to relocate outside of the UK. Is it better with being self employed or Ltd.

8. Is it ok to keep both Ltd and Self employed? Or is it better to scrap one of it?

[Support Monkey]

If your limited and the company goes bust they can only chase the company, you are only liable as a director of the company

If on the other hand your self employed it is you personally who is liable, if it goes pear shaped you lose your house and everything in it.

[Scrag Meister]

You must have been earning very little to avoid paying any tax while self employed.

[Gulliver]

You must have been earning very little to avoid paying any tax while self employed.

I wasn't earning too much indeed and had loads of expenses!