Registering as a limited company
Thread poster: Sonia Hill

Sonia Hill
United Kingdom
Local time: 10:17
Italian to English
Nov 4, 2011

I am currently self-employed and am interested to know if other UK-based translators on here have switched from self-employment to a limited company. If you have, is it a decision you have been happy with?
I have been looking into it and it certainly seems beneficial for a number of reasons. I would pay considerably less tax, I think I could get childcare vouchers, I would still be entitled to receive child benefit if my company earns above the higher tax threshold (very probable this year). The only downsides I can see are higher accountancy fees (still far less than I would save in tax) and a bit more paperwork.
I would be interested to hear about other people's experiences.

[Edited at 2011-11-04 13:01 GMT]


 

Russell Jones  Identity Verified
United Kingdom
Local time: 10:17
Italian to English
Any use? Nov 6, 2011

Hi Sonia

Seeing that you haven't had any replies yet - and being interested in any feedback myself - I had a quick look at some other forums.

The contribution from a Kathy Gamage at the bottom of this thread might be of interest: http://www.everywoman.com/network/discussion/sole-trader-vs-limited-company

Good luck


 

Tom in London
United Kingdom
Local time: 10:17
Member (2008)
Italian to English
Lurking Nov 6, 2011

Russell Jones wrote:

Seeing that you haven't had any replies yet


I've been lurking. Waiting to see what people suggest. On the face of it, it would be advantageous to register for VAT as a limited company.

I would only pay 19% tax instead of 40%;
I would be able to reclaim VAT on business-related purchases;
But would have to employ an accountant and do VAT returns;
...and anyway I purchase hardly anything (as a translator).

So I'm perennially undecided !


 

Sonia Hill
United Kingdom
Local time: 10:17
Italian to English
TOPIC STARTER
Thank you Nov 6, 2011

Thank you for your replies Russell and Tom.

Since posting, I have done a lot more investigation into the matter. I have spoken to another translator I sometimes work for, and he has been very positive about becoming a limited company.
I also found this website, which is a great way of calculating whether you would be better off as a sole trader or as a limited company with minimum salary and dividends: http://www.uktaxcalculators.co.uk/dividend-vs-salary.php
The link you provided was very interesting Russell and pretty much confirms my thoughts. My accountant has also advised me that it would be a good move at my current level of earnings.

I think I am going to go for it, probably starting from 1 December this year. I just need to come up with a company name now!

As regards VAT, I am not sure about this at the moment. I need to add up whether the extra accountancy fees would be more than offset by the savings I could make.


 

Charlie Bavington (X)  Identity Verified
Local time: 10:17
French to English
The best thread I've found Nov 6, 2011

Well, I say "I've found"; I think I was pointed at it by someone here ages ago.

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=60813

'Course, depends on your individual circs. If your partner pays little or no tax, it works out better than if they are already a higher rate payer. I had a concern about how often the company can pay dividends, since any more frequently quarterly may cause raised eyebrows, or so I heard. Then I heard differently. So who knows. Don't forget to factor in that there are allowances you can claim as S/E that don't apply to ltd co.s.

There is also some stuff here
http://www.proz.com/forum/business_issues/54180-set_up_as_a_sole_trader_or_as_a_company_in_the_uk.html


 

Sonia Hill
United Kingdom
Local time: 10:17
Italian to English
TOPIC STARTER
Thanks Charlie Nov 6, 2011

Charlie Bavington wrote:

Well, I say "I've found"; I think I was pointed at it by someone here ages ago.

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=60813

'Course, depends on your individual circs. If your partner pays little or no tax, it works out better than if they are already a higher rate payer. I had a concern about how often the company can pay dividends, since any more frequently quarterly may cause raised eyebrows, or so I heard. Then I heard differently. So who knows. Don't forget to factor in that there are allowances you can claim as S/E that don't apply to ltd co.s.

There is also some stuff here
http://www.proz.com/forum/business_issues/54180-set_up_as_a_sole_trader_or_as_a_company_in_the_uk.html




There was some very interesting information in those two threads and I have a lot to think about. I have an appointment with the accountant who specialises in this area, so I will have plenty of questions for her, especially regarding the frequency of dividend payments.
My husband already has a limited company and is constantly telling me I should go for it. However, I'm not keen on paperwork and the extra hassle, so that puts me off. Financially I'm pretty certain it would make sense, but part of me is reluctant to make the switch.
I'll keep you posted!


 

Charlie Bavington (X)  Identity Verified
Local time: 10:17
French to English
And so.....? :-) Apr 11, 2012

Sonia Atkinson wrote:
I'll keep you posted!


How's it going?icon_smile.gif

I've done some work on the financial aspect, which can be read here:
http://cbavington.com/blog/2012/04/10/start-me-company-up/

(Bit late for you, but others might be interested...)


 

XXXphxxx (X)  Identity Verified
United Kingdom
Local time: 10:17
Portuguese to English
+ ...
Depends on your income? May 4, 2012

Presumably it depends on your turnover/profit. Anyone know at what level it starts to make sense?

[Edited at 2012-05-04 17:30 GMT]


 

Sonia Hill
United Kingdom
Local time: 10:17
Italian to English
TOPIC STARTER
I haven't done it yet... May 4, 2012

Sorry Charlie, I've only just seen your question. After speaking to my accountant, we agreed that we would review the situation later this year. I probably will do it at some point, but just wanted to make sure that my earnings were sustainable at this level before making the switch. At present I have more than enough work and my earnings are on the rise, so things are looking good. My other issue is cash flow and dividends. My personal circumstances mean that it isn't very practical at present, but once things have stabilised it certainly will be. I will read your blog with interest as soon as I have a moment.

Lisa, my accountant said he would only advise doing it if you earn over £35K. This calculator can be quite helpful: http://www.uktaxcalculators.co.uk/dividend-vs-salary.php

[Edited at 2012-05-04 14:35 GMT]

[Edited at 2012-05-04 14:36 GMT]


 

Richard Foulkes (X)  Identity Verified
United Kingdom
Local time: 10:17
German to English
+ ...
Just made the switch myself... May 4, 2012

So trying to get to grips with the different cash flow arrangements. It certainly seems less convenient than the self-employed route (initially at least) but I suppose it stops you spending the money you should be setting aside for your tax returnicon_smile.gif. Hopefully, the tax savings will make it worthwhile.

I'm currently looking for some free accounting software / resource (since I'm already paying an accountant to do my year end) to help me work out how much dividend income I can take as I go. I'll post back if I find anything useful!

Also pondering how much salary to pay myself since HMRC PAYE people said something on the phone about the second state pension being rolled together with the first, which may affect the level of salary needed to maintain state benefit entitlements. I'm going to ask the DWP about that and will come back if I get anywhere.


 


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