Stay as sole trader for next year or go Ltd?

[HandyRocker]

I'm a sole trader and I do maybe 50% of my work by myself and 50% with my brother. If he gets a big job, we'll do it together and I'll invoice him and vice versa. We do property maintenance, decorating, home improvements etc. I live in London and also work as a musician. He lives in Hampshire. I travel down there to do the property work and stay at his house. It's quite an unusual way of working I suppose, but its reliable and it pays the bills and I'm not battling through traffic all day to get to a job.
For 2026, we should both be turning over circa £65-70k, profits of around £35-38k. We will both continue as sole traders until April, but wondering if it's a better idea to go LTD after that?

The MTD is worrying us somewhat, since we often work such long and crazy hours and both have families, it's gonna be hard to keep our accounting so strictly up to date to do these quarterly reports, I'm afraid we'll trip over at some point. Other than that, is there any other advantage or disadvantage to going LTD?

 

[JEREMY HAWKE]

If you want an easier life the just stay as sole traders unless you treble your turn over

This is nothing to do with your question but this is for
@Newchodge
Referring to the VAT threshold thread this is exactly the type of business I'm talking about when I speak about those that dont want more business admin !

 

[DWS]

I would wait until after the Budget in a couple of weeks and see what that brings.
I keep hoping that HMRC come to their senses and scrap it, they cannot cope now so not sure what they are going to do with the additional workload.
My advice would be, wait until after the Budget and then arrange an appointment with a local Accountant, most will give you an initial consultation free of charge, that way they can run the figures and give you the options, opening and running a Ltd Company also comes with more compliance work than being a sole trader.
So it may be you are swapping one headache for another.

 

[WaveJumper]

Agree with the above wait and see what the budget brings. In the mean time I would suggest you look at some of the apps available for the self-employed & even look at accounting platforms like Xero they are (in my humble opinion) not as scary as you may think.

Doesn't hurt to do a bit of research over the next couple of weeks and get yourself prepared for what ever gets thrown our way (its not going to be good) and my last bit of advice would be once you do have a plan / idea of direction seek some professional advice from an accountant / tax advisor

 

[HandyRocker]

Thanks so much for the replies. I didn't consider the budget actually, yes I'll wait for that.
The last few years with the cost of materials going sky high, personal allowance frozen and VAT threshold barely moving is really making this a juggling act. The admin is a struggle already, sending quotes, photos for the quote, photos for the completed job, answering questions, doing invoices, checking off remittances, banking, accounts etc. This MTD might just be one headache too many. We just want to go to work.

 

[Karimbo]

We do property maintenance, decorating, home improvements etc.

Too much focus is put into turnover and tax benefits when pondering whether to go sole trader or ltd co. IMHO the main reason to decide on either is for the protections of a limited liability.

Businesses in this sort of spaces can suddenly implode. a couple of non-paying clients, some remedial work required to be carried out because of a botch job that was done earlier and you find yourself with money not coming in that should be coming and then contractors that need to be paid out for no-cost remedial works and you are in a death spiral.

Go limited, dont look back.

In a limited you can walk away and not look back when the business goes under.

 

[HandyRocker]

Too much focus is put into turnover and tax benefits when pondering whether to go sole trader or ltd co. IMHO the main reason to decide on either is for the protections of a limited liability.

We were literally just having this conversation too! Fortunately for all these years, we've never had any issues, but I guess that doesn't mean we never will.

 

[HandyRocker]

Actually not strictly true, we did have a massive issue about 12 years ago on a job that the customer pretty much knowingly had us over a barrel, working and going into massive debt because we took on a contract that was in all honesty, too big for us and had not considered some complex & expensive logistics (long story, but it's why I'm happier to travel out of London these days). It broke me financially and personally for quite some time, but we worked through it. Still don't think I would have just walked away from it though, but maybe could have been able to negotiate. They knew we made a mistake, but we had accepted the contract and they made us honour it.

 

[WaveJumper]

And talking to my son in law (the builder) last week customers are already starting to get real picky already as the purse strings get tighter. He only does what I would call "high end jobs" and I thought if they pulling in the purse strings now next year is going to be very interesting.

He has work booked until March 26 but very little interest coming in at the moment and blames it on the budget uncertainty. I just hope things are not as bad as we are probably all expecting but personally I am not holding my breath.

 

[HandyRocker]

He has work booked until March 26 but very little interest coming in at the moment and blames it on the budget uncertainty. I just hope things are not as bad as we are probably all expecting but personally I am not holding my breath.

This is why I still take the gigs on the weekends. If the work slows down, at least I also them to keep me afloat. I'm getting too old for all this to be honest, but we gotta do what we gotta do.

 

[MyAccountantOnline]

I'm a sole trader and I do maybe 50% of my work by myself and 50% with my brother. If he gets a big job, we'll do it together and I'll invoice him and vice versa. We do property maintenance, decorating, home improvements etc. I live in London and also work as a musician. He lives in Hampshire. I travel down there to do the property work and stay at his house. It's quite an unusual way of working I suppose, but its reliable and it pays the bills and I'm not battling through traffic all day to get to a job.
For 2026, we should both be turning over circa £65-70k, profits of around £35-38k. We will both continue as sole traders until April, but wondering if it's a better idea to go LTD after that?

The MTD is worrying us somewhat, since we often work such long and crazy hours and both have families, it's gonna be hard to keep our accounting so strictly up to date to do these quarterly reports, I'm afraid we'll trip over at some point. Other than that, is there any other advantage or disadvantage to going LTD?

With a limited company do bear in mind you are going to need to keep accurate up to date records - especially if you want to take dividends (which is generally, with salary, a tax efficient way to pay a director/shareholder of a small company) I really wouldnt look to change solely to reduce admin because I dont think it will.

If MTD does go ahead it will mean quarterly submssions but with some good software it really shouldn't create a huge amount of extra work. You should be keeping accounting records for tax anyway. What are you using to record your business income and expenses currently?

One of the main advantages of a limited company is limited liability — meaning your personal assets are better protected when things go wrong.

Tax savings are generally the reason people switch to a limited company but with profit levels at that level, I suspect you will pay less tax as a sole trader.

 

[fisicx]

The builder we use for all sorts of things went ltd for protection. If it all goes pearshaped he is financially safe.

He never advertises, he gets all his work from referrals and a huge network of tradies. There is so much work (in Hampshire and Surrey) he can pick and choose.

 

[HandyRocker]

Yes, we are very busy too. Its a good problem to have.
We are using self hosted Invoice Ninja (one of my old hobbies was building/programming web apps, I can install & maintain it myself).
It works so well, its a full accounting app I can use from anywhere, even upload photos, files etc for invoices and expenses, run reports etc.

I think on balance l, going Ltd looks like the better option, especially it MTD kicks in. I'll go have a chat with an accountant over the winter.

Thanks for all the advice, I really appreciate it.

 

[MyAccountantOnline]

Yes, we are very busy too. Its a good problem to have.
We are using self hosted Invoice Ninja (one of my old hobbies was building/programming web apps, I can install & maintain it myself).
It works so well, its a full accounting app I can use from anywhere, even upload photos, files etc for invoices and expenses, run reports etc.

I think on balance l, going Ltd looks like the better option, especially it MTD kicks in. I'll go have a chat with an accountant over the winter.

Thanks for all the advice, I really appreciate it.

It's definitely wise to discuss it with an accountant when you do ask them to give you some tax estimates - it may surprise you.

I really would look at some bookkeeping software you will be surprised how much time it'll save you. I dont get any commssions and dont sell it but do have a look at FreeAgent. I think it would be ideal for you.

 

[MyAccountantOnline]

FreeAgent may be free for you too depending who you bank with https://www.freeagent.com/pricing/free-accounting-software/

 

[DWS]

Not related to what you are asking but you and your brother are both operating CIS and making the necessary deductions and submissions to HMRC when you carry out work for each other.
I am finding an increasing amount of new clients who are not so just thought I would ask.

 

[Karimbo]

The builder we use for all sorts of things went ltd for protection. If it all goes pearshaped he is financially safe.

He never advertises, he gets all his work from referrals and a huge network of tradies. There is so much work (in Hampshire and Surrey) he can pick and choose.

There are wild swings in the trades. If you are highly skilled, you can get the best jobs from the best clients. The British tradies got caught out pretty badly when the Polish tradesmen came in around 15-20 years ago. It supressed prices for work. Now it's a little bit opposite, there is a shortage of tradesmen right now and prices for basic work is really high - thats if you can find someone to agree to work.

You really have to chase and chase to find decent tradies.

My nephew has gone straight into the trades against everyones advice. He has good GCSEs and should have gone to college and then maybe take a degree apprenticeship route - because he was trying to avoid going into student debt and we advised him to try and cosnider a funded degree apprenticeship course.

My worry is building work is rreally up and down. post 2008 many firms went under. Especially those that hired loads of workers and had them on payroll or were geared heavily. The sole trader types probably could weather it with less work about with no debt.

This industry goes up and down with economic cycles. Though there are some which are more recession proof than others, emergency plumbers are pretty solid, but then I heard from plumbers that their job is winter heavy and in the summer its a bit dry. painters and decorators I imagine would be very inelastic and during a recession they will lose a big chunk of work.


Some can have inverse demands, extension specialists can do alright when mortgage rates go up because more people stay in and improve where they currently live in.

 

[Johnny Be Good]

I would say paper work is not as hard, as someone else mentioned you can subscribed to Xero for less than £20 a month I think and you take a photo of every receipt you get from Selco, screwfix, Toolstation, etc and Xero will find out the supplier, scan the amount and create an entry for you to inspect and approve. All from your mobile phone!

Going Limited you will be paying minimum national insurance as you will be paying yourself minimum wage and the rest in dividents and i think it works a bit less if you are in the sub £40K mark. Also if one year you make millions you don't need to take the whole amount out and get taxed 40% as when you are a sole trader.

With regards to the future is also easier to employ your wife, kids, pets, nephews etc! so you split your tax burden. The only problem is if you both part of the same limited company you are hit by the VAT which our friend Rachel might reduce the threshold shortly...

 

[HandyRocker]

The only problem is if you both part of the same limited company you are hit by the VAT which our friend Rachel might reduce the threshold shortly...

if that happens, we're gone. With the cost of materials and the current rate of inflation, reducing the VAT threshold is surely gonna be fatal to a lot of tradesmen. I guess we'll all be working min wage for some corporation at some point. We will either lose that part of our income to VAT, or prices will have to go up and we won't get the work. Either way, we'd be better off stacking shelves.

The web app that we use right now is actually very good, we can upload photos of receipts from our phones just using a web browser. It won't be MTD compliant tho. We will be entirely separate businesses, because we do our own things, we only help each other with the bigger jobs that need doing to a deadline.

 

[DontAsk]

if that happens, we're gone. With the cost of materials and the current rate of inflation, reducing the VAT threshold is surely gonna be fatal to a lot of tradesmen. I guess we'll all be working min wage for some corporation at some point. We will either lose that part of our income to VAT, or prices will have to go up and we won't get the work. Either way, we'd be better off stacking shelves.

Everyone will be in the same boat, and the playing field will be a lot more level (i.e. you will not have an unfair advantage over larger companies).

If the work needs doing you will still get the work.

Not nice for customers but that's another side of the story.

 

[Karimbo]

if that happens, we're gone. With the cost of materials and the current rate of inflation, reducing the VAT threshold is surely gonna be fatal to a lot of tradesmen. I guess we'll all be working min wage for some corporation at some point. We will either lose that part of our income to VAT, or prices will have to go up and we won't get the work. Either way, we'd be better off stacking shelves.

I think opposite, it will give everyone a push to grow, the current vat threshold means too many micro businesses about, just trading for subsistence income, just flying under the threshold. avoiding growing the business as they dont want to be registered.

it also means for those who are doing well, and wanting to grow, say they are on £100K turnover. they get undercut hard by the sole traders on £60K

 

[HandyRocker]

A fair chunk of my income is from doing gigs in pubs and clubs. I can't charge them VAT on top, they pay what they pay and you take it or leave it.
I guess maybe I could separate that as a different business, since it is an entirely different type of work. I just do my gigs and my handyman work all under my own name as a sole trader. Maybe I'm better off to just separate the two?

 

[Newchodge]

if that happens, we're gone. With the cost of materials and the current rate of inflation, reducing the VAT threshold is surely gonna be fatal to a lot of tradesmen. I guess we'll all be working min wage for some corporation at some point. We will either lose that part of our income to VAT, or prices will have to go up and we won't get the work. Either way, we'd be better off stacking shelves.

The web app that we use right now is actually very good, we can upload photos of receipts from our phones just using a web browser. It won't be MTD compliant tho. We will be entirely separate businesses, because we do our own things, we only help each other with the bigger jobs that need doing to a deadline.

As all your competitors will also have to comply if the VAT threshold is reduced, why would you not still get the work?

 

[HandyRocker]

As all your competitors will also have to comply if the VAT threshold is reduced, why would you not still get the work?

I dont think it will stop us from getting the work, just that possibly less work to be had and the bigger companies will be more competitive due to their size and scale, certainly when it comes to their costs, materials etc.

 

[paulears]

I had to smile with this bit.

A fair chunk of my income is from doing gigs in pubs and clubs. I can't charge them VAT on top{/quote]
When I was with a band that toured the UK and abroad, the no VAT insistence madce me do a bit of research and very few venues and pubs are not VAT registered, because while they often complain about making little, their turnover puts most of them into VAT registration. There seems to be some kind of internal craftiness (as in dodgy activity) where the pubs and clubs pay bands and DJs via loose money that is unaccounted for. In my experience it's not even just the pubs and clubs. Golf courses were a place who often booked our band, and some were the big named ones - and they paid us in cash (which we hated, because of how tricky it is to actually bank cash nowadays) Often, we would quote these places amounts such as £2800 + VAT, and they would agree. Then, on the night, they'd want to pay us £2800 in cash, with no VAT. I never found out how this could possibly work, but I suspect they paid from bar takings or other cash rich sources, and just tweaked the figures. Not little fly by night pubs but places who do weddings and have decent facilities. It often meant that we would actually lose the VAT - as we declared it properly to keep things straight. Not uncommon at all. If you look at a typical pub, open 7 days a week, the turnover is £250 a day - how any pub/venue can operate below this makes no sense. Staffing costs alone, let alone everyday expenses mean if a pub is NOT VAT registered, you have to ask why.

They probably don't want to deal with their entertainment suppliers who are VAT registered, because they have to pay them through the books.

 

[HandyRocker]

Yes, I guess some local pubs probably still pay cash, but hardly anyone takes cash to the pub now anyway, so I yes, don't understand how they'd even have the cash to pay their bands. All gigs used to pay cash on the night, up until around 10-15 years ago. Back in 90s, I could buy around 70 pints of beer for what I got paid on a pub gig, now I can buy around 22. Bloody politicians owe me an ocean of beer!
I don't do any corporate/weddings these days, I never really liked them. All the gigs I do these days are in central London. We don't even get paid directly by the venue now, it all goes through a payment agency. The only upside to that is, we no longer have to hang around waiting the landlord or manager, I can just chuck my guitar on my back and I'm off.
Even in central London though, we are seeing they're less busy than they used to be.

 

[HandyRocker]

So on the face of it, inflation and frozen threshold will likely push me into VAT zone sooner or later, but for the next year or 2 at least I expect to be turning over no more than around £60k-£75k, profits of around £40k.
I am a home owner, so LTD liability makes sense on those grounds, but from what I can gather I'll likely pay more tax and have more accounting costs. That's worth it if god forbid something awful happens, and my home is protected.
I'm going to switch to Freeagent or Xero from next April for sure, the bank reconciliation capability alone is gonna make life so much easier, especially with MTD, that should actually be no issue at all.

Realistically tho, I'm unlikely to go into debt as a result of anything to do with my work. I don't take on any work that requires any significant outlay and my business insurance covers me up to £10m + legal costs. So what could happen happen as a sole trader that could put my home at risk?

Protecting my home, is really the only reason I should consider going Ltd isn't it?

 

[WaveJumper]

Yes Ltd will protect your personal assets, it could also be more tax efficient and be useful for pension planning. Personally I would seek out a local accountant, speak to a few find one that understands what you do, one you can relate too and work with.

Always best to get the foundations right from the get go and you never know what they might come up with in terms of things to be offset against any tax liabilities etc etc

 

[HandyRocker]

Thank you, I'll get on it. Cheers

 

[DontAsk]

At that level of turnover a good accountant should be less than £1k and be able to save you a good chunk of that.

Do start thinking now about the hit on profits when you need to register for VAT. Remember you DO NOT need to raise your prices by 20% as some would have you believe. The more you can offset input VAT, the less you need to charge to cover output VAT.

 

[Lisa Thomas]

The corporate veil of a limited company only protects you if you don't give personal guarantees to creditors, and if you don't commit misconduct as a Director, (in which circumstances the veil can be lifted and you can be pursued personally.)

 

[HandyRocker]

Haha well committing misconduct is part of my job, I'm a musician!
But otherwise I don't really plan to do anything other than paint people's houses and sing in their pubs.
In all the years I've been doing this, I've never had any issues like that.

I'm in my 50s now, and whilst that doesn't necessarily mean I'm that much more sensible, I'm not interested in taking risks. I like my job and I like life the way it is. I just want to find the best and most secure way to just carry on what I'm doing.