Currently sole trader wanting to start another business?

[allthingsgifts]

Hi
Bit sad posting on xmas eve but first chance i've had to post since october!
Currently a sole trader and vat registered and looking to setup another website next year selling something similar to what i'm doing now, well to do with gifts anyway. I am going to see an accountant about what is best to do but just wanted to do some research first so i ask all the right questions. My problem is, if the 2nd business is a kept as a sole trader and i add both together then tax will be at 22% assuming i actually make any money in the first year and will be automatically vat registered. Is it possible to keep them separate somehow, but i would be running both on my own? I notice that others that have several websites are trading under a ltd company called something different to the websites like xyz enterprises ltd.
Thanks for any help or any links for further reading would be much appreciated.
Merry Christmas
Lianne

[David Griffiths]

As you say, if you start the second business as a sole trade, then it will automatically fall in your current VAT registration - it's you that is registered, not the business.

Profits will be taxed at 20% which is the current basic rate, not 22%. If you have total income which is high enough (over £41k approx) you will pay 40% on the excess.

If you run the business through a limited company, then that wouldn't be obilged to register until its turnover is over the £67k current registration threshold. However, HMRC have power to prevent artificial separation of businesses to avod VAT. so this is one thing you'll need to discuss. If the two businesses aren't in the same field, you'll probably be OK

One advantage of a company is that once you've paid the corporation tax which will be 22% next year - you can choose not to take money out if it will push you in to higher rates. Leave it there and you can draw it in future. Of course if you are consistenly into higher rates, you just have to take it on the chin, otherwise what's the point in earning the money? :)

Not that there aren't things that you can do with pensions and the like to reduce the impact. And if you earn really serious money, there are more things that can be done to help. ;)