UKC

Hello everyone. This is mainly aimed at accountants or those who have some useful experience of this. I'm about to set up in private business after too many years in the public sector. I'll be working as a one man band (certainly for the first couple of years) based at home, and I'm struggling on whether to be a sole trader or a limited company. I know it shouts sole trader, but there are a couple of aspects that point me towards Limited.

I have worked as a agency worker, where the pay as a limited Company worker is very beneficial as compared to sole trader. Agencies also like their workers to be LTD, and I would like to be able to supplement my income for a while by doing part times agency work. The other main point is tax breaks. As LTD, I ended up paying very little (as compared to public sector employee) tax, and this obviously appeals. I know and have previously experienced the rigmarole of listing a company, annual accounts, accountancy costs etc.

If there is anyone out there who would be able to give me 5 mins unbiased advice on this (by phone or email?), I would be eternally grateful and could offer an afternoon of grit jamming school in return!

Many thanks
G

In reply to gribble:

give these guys a call http://www.sjdaccountancy.com/about/ourservices/first_timers.html

In reply to gribble:

The key question is "what services will your trading entity be providing. Within the professional sphere, eg IT, accountancy, there isn't a reputable agency in the UK who will take on a sole trader as it exposes them (and their customers) to any irregularities in your declarations of income for tax purposes. I'm not saying that personal service company (one man band limited company) owners don't fiddle their tax or that all sole traders are dodgy. But the risks of contagion are contained when trading with a limited company. I can't speak about the trades or sectors like health or teaching, but as someone responsible for enforcing this policy at the professional end I can assure you sole trader is a complete no-no.

Just to complicate matters further, the tax breaks enjoyed by limited company owners have been slashed, bringing about a significant increase in tax payments from April 2016, and there is a good chance that other allowances may be withdrawn in the autumn statement on Thursday, so leave your decision until then at least.

In reply to gribble:

Thanks both for that. I'll give the accountancy link firm a call tomorrow (hopefully they won't be biased!). My service is health orientated, with the majority of clients being private individuals. However, I take your point as some will also be organisations. All good food for thought.

In reply to gribble:

When I was contracting to the dirty oil industry I couldn't be a sole trader. I either had to be PAYE with an "umbrella" agency (I was with NASA consulting, very cheap and helpful) or LTD.

In reply to gribble:

Depending on your expenses I would also consider the PAYE umbrella route. I had significant mileage ~1000 miles a week which left me usually basically paying 0 tax and only NI. I found most umbrella companies incredibly difficult to process anything more complicated than mileage claims

In reply to gribble:

They will be biased. They will make more out of you as a Ltd. Company.

You have three choices. Sole trader, umbrella, or Ltd. Depending upon how you get your work will limit these. Agencies do not like sole traders alas. As a sole trader you would be paye, self assessment, and pay type 2 ni (nominal). However the agent can be liable should you not pay you tax properly. Generally they won't deal with sole traders.

Umbrella is basically like being a permie. You'll pay tax and two sets of NI. Employees and employers. However it's simpler and you will not need an accountant

Ltd is potentially the most tax efficient. You will have more stuff to do though. Like being competent in running your our business, know about tax etc. Though as others have said one man Ltd or psc's may be subject to change soonish. Or not. If you have multiple clients this may not be an issue. You will also need personal indemnity insurance etc.

If you go Ltd. Check out crunch accounting. They will be cheaper than sj but you will need to do some stuff yourself.

Being self employed is one of the best things I have ever done.

The best of luck.

Cheers
Mark

In reply to Fultonius:


That's a really good point. Working under an umbrella company isn't a bad place to start. I did it when dabbling in IT consultancy. It allows you to focus on your work without worrying about the financials. There isn't too much of a hit tax wise either and you are 100% inside the law without having to worry about the dreaded IR35 grey fog. For me, it was the ideal thing to do as 6 months down the line my contract ended (before Xmas) with not much in prospect so I gave up and got a permie job again. Had I had a limited company it would have cost to wind it up and all the other faff.

I would definitely recommend to start out, and when you get established, set up your own limited company to take full control of your finances.

Good luck!

In reply to gribble:

Thanks again everyone. I'd prefer to avoid umbrella, I'll not be going back to permanent again and waiting for this Thursday does seem prudent. There has been some excellent help in the replies, so thanks again. I'll be phoning Crunch, SJ and also IMS (used them before) for comparative views, then its decision time. Thanks also to posters who have PM'd me. UKC can be most helpful at times!