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One of the hottest topics in the business world when it comes to tax and accountancy is “Should I move from sole trader to limited company?”

When we start our business, we try to keep things as simple as possible most of the time. We register as self-employed, trade as a sole trader and focus on building our business and our income. Then when it comes to that (usually dreaded) time of year, we file our returns with HMRC, pay our taxes and then carry on with our lives… usually, sometimes after a lot of stress, and finding receipts and wondering what goes in what box on the form. But it’s done…

As we grow, we spend more time around other business owners, and the talk goes to moving to a LTD company and everyone starts raving about it. But in your head, all you can hear is the things you have read online, maybe heard from others and you wonder, is it really right for you?!

Here at Jaccountancy, we understand that things can be super confusing and also that not all of the information that you see online is right for you and your circumstances! The tax world is constantly changing and the advice found online is likely to be out of date.

Here are the “Top 5 Myths Around Going LTD” that we have heard over the years in our industry, and why those are actually not just holding you back in your business, but maybe even losing you money!

“I don’t earn enough to move from sole trader to limited company in my business yet… I will do it when I make more money!”

This is not true. People believe that in order to be a limited company, you need to be earning 6 figures plus in your business and it really is not the case. You can set up as a LTD company at ANY point in time, and the benefits actually kick in for you at a much earlier stage than you might think. If your revenue is above £16k a year, the benefits of being a LTD company especially relating to taxes are HUGE and by staying as a sole trader, you are potentially missing out on a lot of money!

“I don’t want to register as LTD as it’s really expensive”

Ok, we won’t lie to you, there are some costs associated with registering as a LTD company if you go it alone. However, the benefits of being a LTD company from a tax point of view far outweigh the initial set-up costs and any additional returns that you have to file. By paying yourself a regular salary through your company payroll and taking dividends, you actually reduce the overall amount of tax you have to pay. Jaccountancy can help pull together remuneration strategies to help clients be as tax efficient as possible.

“It just seems like a lot of risk setting up a formal LTD company!”

Did you know that as a sole trader all the liability and risk within your business actually lies with you! That means that if the worst should happen, and you need to pay fines etc, if they are big enough this can affect things like your house, personal property and other non-business related assets being at risk.

By registering as a LTD company, the company becomes a separate legal entity where the liability and risk sits with it and not you! This protects you and your personal assets against any issues that you may face in the future and keeps you and your family protected! With a limited company, you have limited liability and worst case, you will only lose what you have put in.

“But don’t I have to pay double the tax… both personal and company taxes?!”

This is something people get confused over and we can see why! As a LTD company, yes you do have corporation tax returns While still completing your personal tax returns too!  However, this does not mean that you have to pay double the tax! In fact, the likelihood is that you will pay LESS tax overall as a LTD company than you would staying as a sole trader. This is also where working with someone like Jaccountancy comes in as we can remove that stress for you and ensure everything is not only correct and in order, but that you get the best outcome for your business in terms of what you have to pay overall!

“But don’t you need to be a big company to be LTD with lots of shareholders etc!?”

Again, this just is not true! In fact, in order to be a LTD company, and get all the benefits that gives you, you only need one shareholder… YOU! Additional shareholders could be added should you want to as your business grows but in order to function as a registered LTD company you only need to have one.

We understand that there is a lot of information out there around this topic and that not all of it is actually correct. There are some instances (although very few) where staying as a sole trader is the most beneficial for a business, but in most cases, this isn’t the case and you could be losing out on so many benefits that come with going LTD.

If this is something you would like to explore, to see how this could potentially benefit you and your business, why don’t you book a completely free, no-obligation call with one of our team! We can talk you through the process for you as an individual and give you advice on what we think would work best for you in the long term!

Our October New Company offer enables you to make the switch from sole to limited – we’ll set up your company for free and provide a whole list of other benefits – click here for the full details.

Book your call today with one of our team and let’s get you reaping the rewards for your business!



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