Should you be trading as a Limited Company?

April 3, 2019

One of our new clients came to us that was trading as a Sole Trader and was extremely confused by the amount of tax he was paying and when. He had incorporated a Limited Company previously, but it had lain dormant for a few years, his previous accountant had told him that he would save tax but had not explained how much tax, the mechanics of it or the process involved in transferring the business to a limited company.

 

 

As part of completing the business accounts for the year ended 31st March 2018 we reviewed the tax that would have been payable as both a Sole Trader and a Limited Company taking into consideration his wife's income and role in the business.

 

 

The results of the comparison were savings of £6,900 per annum between the husband and wife.  As a result the business was incorporated on 1st April 2019.  We then worked with the client ensuring that the process of moving to a Limited company was as painless as possible.

 

 

This is an extreme example, but it is worthwhile checking you are trading in the most tax efficient method on a regular basis, HMRC have introduced numerous changes over the past few years that have reduced the tax savings by trading as a limited company so the answer is not as black and white as it was a few years ago.

 

 

On a final note, if you don’t understand your tax bill you need to bat it back to your accountant, our role is more than issuing you with a tax bill each year that you don’t understand we are here to help and support you and your business.

 

 

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