Limited company of self assessment

[sam10069]

I am just wanting a bit of advice regarding the difference and best option between setting up my own company or just filling in self-assessment tax returns as an individual. I am currently working full time but am thinking about setting up as a self employed software developer consultant. Before I do this I want to focus on building up my website and generating an income from that, but am not sure how to best to do this.

Would I be better off setting up a limited company for the website to process any earnings or would it be better to just register for self-assessment on the HMRC website or wherever you do thatr and what are the pros and cons! Please bare in mind I have no idea how to do either of these things so any advice in this area would also be much appreciated but guess I will be able to look into this myself more when I have got an idea which way to go!

[d9f1c7]

The 2 things are not really related. A tax return applies regardless of how you earm your income. The vehicle you use to earn is irrelevant to the tax return, you may have different boxes to fill in but it ios not an either/or situation.

[buildersmate]

I'm not sure I can understand what the above is talking about.

The difference between the two is that as a director of a limited company, you are employed by that company and you take PAYE salary from that company. But you are also a shareholder of that company, so some of the profit of the company can be channeled back to you are dividends.

Why does that change the price of fish you ask? Well it all depends on how much income you have from the website. Unless you are into higher rate taxpaying, running a ltdco isn't likely to help you financially. If you have significant income, a non-working partner/spouse can work in the business doing admin work and can certainly be a shareholder, such that some of the income can be channeled into his/her earnings. By paying yourself in dividends, you effectively just pay the 20% small business corporation tax rate, provided you can keep your overall earnings below the threshold for higher rate tax.

However running a ltdco comes with some overhead costs - an accountant for starters if you know nothing about how to structure these things.

As a rough measure, unless your income from the webite is greatere than £50k pa it is unlikely to be beneficial to run it as a ltdco.

There are also limited liabilitily advantages of course - in the event that the business goes belly-up, your own personal wealth and assets is not put at risk.

[sam10069]

Thanks buildersmate, i think that is my issue at the moment the website business is not earning that much but with my full time job it may take me into the higher rate tax band overall. My aim is to get this up an runing and then maybe reduce my hours in my current job or leave it altogether and set up as a consultant alongside the website and run them all through the ltd company, my partmer does actually help out and would pay tax at a lower rate so maybe that is something i need to look into. But i guess its going to take a year or so before im ready to do this, so in the mean time it will be just the website ruinning alongside my main job. Is there an issue with just declaring myself self emplyed and employed for for now and filling in a self assesment form then maybe starting a ltd at a later date as it builds up. Also as it is something my partner is also involved in can we fill in a self emplyed self assesment together and how would that work if we both in different tax bands? Apologies for my lack of knowledge which is probably showing in my questions but appreciate any help/advice you may have

[d9f1c7]

All I'm saying is that the tax return covers income from any source, the earning vehicle is irrelevant to that.

[buildersmate]

Many ltdco businesses start out as self-employed situations and then convert to ltdco later. Absolutely no problem doing that.

[dailyfiling]

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