Sam Corcoran has over 20 years experience as a chartered
New technology is used to keep costs low and provide an efficient
Sam is also a chartered tax adviser, so up to date tax advice is
available to ensure that you are not paying too much tax.
Forming a Limited Company
1. The corporation tax rate for profits up to £300,000 is 20%.
2. Dividends can be paid out by the company to its shareholders. The
shareholders do not have to pay any National Insurance (NI) on the dividends
received. Unless the shareholders are higher rate tax payers then they have no
further tax to pay on the dividends received.
3. For a business with profits of £20,000 the tax and NI savings can be over £1,000
4. For a two partner firm (e.g. husband and wife) with profits of £50,000 the
tax and NI savings can be over £4,000.
5. If the trade is carried on by a limited company then the liability of the
shareholders is limited to the value of their shares.
6. Passing on ownership of a limited company is easy (the shares can be sold)
and taper relief can be available to reduce any capital gains tax by up to 75%.
7. A limited company has a clear management structure with the directors running
the company and the shareholders owning the company.
1. The director will be employed by the company and will have to be paid a wage
by the company. If the minimum wage legislation applies then a wage of over £10,000
may be required. Paying the National Minimum Wage involves extra administration and incurs National
Insurance costs of about £1,000.
2. The record keeping responsibilities of the director are more onerous than for
a sole trader. The accountancy work involved in preparing limited company
accounts is more than for preparing sole trader accounts, leading to an increase
in accountancy fees of about £400 per annum.
3. Pension contributions can be limited by the salary received. If the salary is
low, then pension contributions above £3,600 per annum may not be possible.
4. Some mortgage lenders base their lending limits on salary. If the salary is
low then the amount lent may also be low.
5. Some banks require debentures and guarantees before lending to limited
companies. These can cost £300 to set up.
6. Assets that are likely to increase in value are often best held outside a
limited company to avoid double taxation when they are sold.
7. Any letter headed notepaper needs to be changed to show the new name of the
company, the registered office and company registration number.
8. Some suppliers treat the new limited company as an entirely new business and
will not transfer the credit rating and credit terms of the old unincorporated