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Simone - remember that there is a £2000 employer's allowance, so there's no employer's NI to pay for a long time, if at all, unless you employ other staff.
Liz F - the threshold isn't nearly that high.
Say you are a sole trader with taxable earnings of £17,000 (ie. income less deductible expenses):
- after the £10,000 personal allowance your taxable income is £7,000, which at 20% tax = £1,400.
- the class 4 NI threshold is £7956, so your NI'able earnings are £9044 x 9% = £813.96.
- class 2 NI @ £2.75 per week = £143
- Total to pay HMRC = £2356.96
As a Limited Company you earn the same £17,000 after expenses
- pay yourself (through a payroll of course) £10,000 tax free using your personal allowance (there will be some class 1 NI to pay at this level, or you could pay a bit less to keep below the threshold)
- net profit = £7,000 x 20% corporation tax = £1,400
- cost of accountants fees = say £500 (you may be able to negotiate a reduced rate because you do all your own bookkeeping and your accountant may already know the standard of your bookkeeping as he is the accountant for 1 of your clients)
- total to pay = £1,900.
Therefore at £17,000 income after expense it is worth doing it.
Registering as a limited company was easy, and I did it all myself. You do have to complete an annual return to Companies House once a year at £13, but otherwise I have incurred no additional costs. Mind you - first year end is just approaching.....
Kind regards
Debbie
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