Going Limited

[jtrtrading]

Hi everyone,

I've been selling online for a while now, I'd like to make my business limited, I still work for my employer 4 days a week though - if I go limited would this effect my tax code in any way?

Also, does anyone know how time consuming/difficult the paperwork is after you're setup as limited?

Thanks!

Jamie

 

[Scalloway]

There is no reason for your tax code to change if you own a limited company. If you take a salary from your company you should be on code BR (20% tax on all income).

There are two compulsory bits of paperwork for a limoted company. The annual return, which is very simple, and the annual accounts. You will also need to compalte a Corporation Tax Return.

Preparing the accounts is the most onerous part of the process. They have to be in more detail than sole trader accounts and must be submitted in iXBRL format.

 

[Philip Hoyle]

Also, does anyone know how time consuming/difficult the paperwork is after you're setup as limited?

Further to Scalloway's answer, I'd also highlight the importance of you understanding and respecting the difference between you and your company. Far too many people don't appreciate this legal distinction and get themselves in all kinds of trouble by getting personal and company mixed up when paying bills and taking money out of the company.

People just don't get it that they can only take out money under certain circumstances, each of which needs a paper trail to make it legitimate, either payroll (with payslips and reporting to HMRC), dividend (out of post tax profits so needs accounts and dividend voucher to support), expenses reimbursement (needs expenses claim and underlying receipts), or finally director's loan (subject to personal income tax and national insurance on benefit in kind and tax on company if not repaid within 9 months of year end).

I'd say that you need to understand the distinction and then learn to keep proper book-keeping and establish a system for paying yourself payroll, expenses and dividends. It's not rocket-science but it does need setting up properly.

 

[EstherG]

You should also consider whether you need to form a limited company? You could just remain employed and then submit a self assessment return for your self employed income.

As the previous posters have mentioned there are legal responsibilities involved with being the director of a limited company and whilst it's not difficult it will require commitment on your part to devote the necessary time to running your business compliantly.

All the best.

Esther