Should I go Limited?

This is a question we hear all the time at Orben Accounts.

Should I as a sole trader become a limited company?

There is still a lot of hearsay out there that Limited Companies have much more favourable tax treatment than the self employed sole trader. That by taking low salary and then timing your dividends to stay within the basic rate band if you can, you are the most tax efficient tax structure possible.

Well unfortunately this isn’t as clear cut these days. Parking the increased and onerous reporting requirements of limited companies, let’s look first at the financials:

Since the dividend tax was introduced, designed expressly to level the playing field between limited company directors and the self employed, there isn’t much in it as the below example demonstrates.

*The difference in these is the increase in accountancy fees, taking Orben Accounts’ modest fees as an example

As you can see the decision to become limited at this income bracket is not a decision to do with tax.

It is more a question of the limited liability that limited companies afford you, and even then decent insurance as a sole trader can go some distance to mitigating that risk.