Limited Company versus Sole Trader

Sole Trader Vs Limited Company

If you are new to contracting or freelancing your first thought is likely to be ‘what’s the best trading method for me?’

It is important to get proper balanced advice to help you make the decision as some accountants might steer you towards a Limited Company when actually a Sole Trader Solution would benefit your situation, or vice versa.

Anticipated Turnover

The first thing to consider is your anticipated turnover – there may be tax efficiencies in operating through a Limited Company which could maximise your take home pay. Many people are attracted to the status of being a Company Director and trading this way also provides security, as the owners and shareholders of a Limited Company are not usually personally liable for any debts run up by the business.

Admin Involved

But trading through a Limited Company brings added admin burden and directors responsibilities, such as filing annual accounts and information on company shareholders. You are also liable to pay Corporation Tax on profits.

Tax Efficiencies Vs Hassle

If you don’t think the tax efficiencies are available as you don’t expect your turnover to be that high, or if you are just a little frightened about the responsibilities involved in running a Limited Company then often when starting a business the simplest way is as a Sole Trader. After registering with HMRC, you are simply required to complete a Personal Tax Return each year and pay tax on the profits you make.

Get the right advice

Whatever you do, don’t make the decision without seeking advice first, and although he might have great trivia knowledge ‘Bob from down the pub’ might not be your best option here. Seek out a specialist accountant with experience in your field (ask around for a personal referral from others already contracting, or ask Bob to recommend one!), set up a time for a chat either face to face or by telephone, and discuss your options. Most decent accountants will provide this initial meeting for free.

Our Accountancy Packages

Choose from a choice of three fixed-fee packages, each one designed to suit how 'hands-on' you would like to be in the day-to-day administration of your company.

Standard Package

Provides all key Limited Company support services that an experienced contractor requires - ensuring low costs but leaves you with the responsibility of making all HMRC payments.

+VAT/month Find out more >>

Standard Plus Package

All the benefits of our Standard Package plus Initial IR35 Contract Review, Annual Tax Planning Review and Second Shareholder Personal Tax Return.

+VAT/month Find out more >>

Premier Package*

Our most popular service, 83% of our clients enjoy the all- inclusive support that this option provides. We take care of everything on your behalf – you won’t find a more complete service anywhere.

+VAT/month Find out more >>