When setting up a new business, one of the first doubts is if you should be working as a self-employed or via your own limited company.
In this article, we will be discussing both legal processes, - as well as the benefits and drawbacks of each one - to help you decide which type of legal structure you should work under!
The difference between a self-employed and a limited company
There are many differences between working as a self-employed or setting up a limited company, therefore it’s essential you consider the following points when evaluating which business structure is best for you:
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Be aware that, no matter whether you work as self-employed or through a limited company, you must register for Value Added Tax (VAT) if your turnover reaches £85,000 or more per tax year.
Take Home Pay as a Self-Employed and as an Employee through a Limited Company
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Be aware that if you choose to set up a limited company, all of your business income go through the limited company, of which you are considered an employee, as shown above.
The limited company also pays corporation tax on its profits. You can also take a salary from the company, which reduces the company's tax bill but can increase yours as an employee.
Also note that these calculations don't include expenses, which can change the final take-home pay.
Is the limited company or self-employed better?
It depends! Whatever route you think works best for you, weigh both options and try to discuss it with people who work as self-employed and also with others that have set up a limited company, since this is definitely not a clear-cut choice. The best decision for your business will depend on your circumstances!
If you choose to work as a self-employed, Tommy's Tax is here to help you with your tax refund! The process through our app only takes 5 minutes. With our "no refund, no fee" policy, we can check to see if you're owed any money for free!
Using Tommy's Tax app will help you claim the maximum amount possible! On average, people who claim tax returns through Tommy's Tax app earn £3000, which is significantly higher than what they would have claimed themselves!
Just download our app to claim your tax return today!
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