Currently self-emp, 40% tax rate.. change route?

[moneyups]

My question to the following text is: Would it be madness to continue as a sole-trader paying 40% and not go limited no matter how much extra paperwork/hassle it brings?

I'm currently self employed and about to register for VAT as incomings for this year (since June) are near the £60k mark and so I'll bypass the limit shortly and I have very little outgoings. I earn my money mainly from Adsense, website advertising and some affiliate programs.

Basically this is the first year I've got into this market and much more than I've ever earnt before, so I'm noticing that becoming a high rate tax payer will be taking a shocking chunk out of my income (using online taxcalcs).

It's an amount I'm not too happy about, it's only that meeting the VAT limit has made me think about the best route to take from now - I don't have an accountant yet (I have a relative who knows a little about basic accounting so got me started) but will be booking one shortly.

I'm hesitant to go Ltd even though the advantages apparently would be great, it seems like a huge headache (accountant will help I know) with appointing a secretary and dividends/wages.

Would I be mad to stay as a sole trader with these amounts involved?

How much can I really save being Ltd as opposed to Sole if a yearly profit of £100k is likely?

Thanks for any advice/help. I understand an accountant would help greatly here but it's nice to get other's views as they may hae gone through the same thing!

[steve atkinson]

my brother in law has earnt 125k this year already but he does not pay tax as he keeps putting money into his business or lending his business money iknow it works this way but not sure how
check with an accountant but he is in his third year and has never paid tax
steve

[bwglaw]

Absolutely mad to stay sole-trader, thats my opinion. There is not a great deal of paperwork when running a Ltd Co. I manage three of them and the paperwork is not so bad.

I do advise against using a family member to do any accounts especially with the amounts you state you are turning over. It is serious business now and an accountant should be on board. Their fees are not so high if you keep papers organised and not a large bin bag full of receipts!

It is also a good idea that the Ltd Co is liable for VAT rather than you personally.

I have not paid tax for 3 years either!

Btw, I would like to know how you make so much from Adsense!

[JustOneUK]

Btw, I would like to know how you make so much from Adsense!

Traffic. :)

[fastfences]

Oh, so that's why 'everyone' is starting directories! :wink:

It's ok, James. I'm proud to have a paid ad' in yours!!
Cheers, Nigel

[creospace]

Interesting if you are not selling a product and all your money coems in vis ad sense etc how does VAT work?

Gary

[JustOneUK]

Oh, so that's why 'everyone' is starting directories! :wink:

It's ok, James. I'm proud to have a paid ad' in yours!!
Cheers, Nigel

Cheers Nigel :D

Most of your traffic will come from forums, however they are not customers, they are webmasters coming to see what your webskills are like.

I have various sites listed in directories, again they get no traffic EVER from those listings, as the only people who go to the directories are webmasters trying to submit their own site.

I would be interested to know if you get any clicks from JustOneUK as i don't use any tracking software. Hopefully next year you will be desperate to renew your advert, to maintain your TOP SPOT :D

[moneyups]

Thanks for all the responses, looks like Ltd is where I'm heading although I'm particularly curious about the 'Ltd Co being liable for VAT so I don't pay any tax' line of thinking mentioned by a couple of you. I assume tax is still paid but on the LtdCo's profits and at corp rates but personally you pay nothing as long as you don't pay yourself more than the bottom rate tax limit per year?

Still, certainly helped push me in the right direction.

[multilingual]

We went Ltd for tax reasons.

Get a good accountant to go through it all with you.

Don't worry about the paperwork, there is a lot more than for sole trader, but after the initial forms it tends to get easier. Your accountant can handle 90% of it, but I would look into this sooner rather than later or you will be clobbered by the tax man.

This is really something you should have looked into 6 months ago to be honest.

:)

JB

[gj]

You should speak to an account asap as you you are potentially incurring 40% tax unnecessarily on profits you are currently making.

If you would like a simple explanation as to how a limited company works, snd me a PM

Regards

Graham