Ltd Company Yearly tax return

[ratzin]

I'm a freelance graphic designer.
I earn around 30k per year.
It's a simple business; I go to peoples office, I do the work, I give them an invoice. No real expenses or overheads
I'm thinking of becoming a Ltd company because some agencies demand it.
Is the yearly tax return for such a simple entity difficult?
Do you think I could do it myself?
Thanks folks

[maths]

Assuming 30K profit (ie no expenses) with a personal allowance of £4,895 you will still only pay income tax at 22% (assuming you have no major other sources of income).

I would avoid forming ltd company if possible.

Often reason why agencies ask for ltd company with whom to contract are spurious so i would hold out as you are.

If all else fails a firm of accountants should be able to help re a company relatively cost effectively.

[ratzin]

Thanks Maths

I really don't want all the hassle of a Ltd company but some agencies insist that if I am not Ltd they will extract payment from the client and then pay me... minus tax and NI.

It's a blinking nerve but they hold all the cards

Thanks again

Steve

[deanshepherd]

Hi Steve

Due to the administrative burden of operating as a limited company, compared to that of a sole-trader, I would not normally recommend it in your case.

However, if it will help you attain more work and grow the business then perhaps it is something you should consider. Indeed some of the costs will be offset by the savings in tax.

In answer to your question, I would not even recommend tackling a self-assessment tax return without the help of an accountant - although I appreciate it is possible and many people do. To complete a corporate tax return, prepare statutory company accounts, operate a payroll scheme and calculate an appropriate profit extraction strategy - in addition to your personal tax return - I think would be foolish without the help of an accountant.

If you click on the 'Find a professional' link you will find many accountants offer a free initial consultation, as indeed do I.


Dean Shepherd
MMI Accountancy
dean@mmi-online.co.uk
www.mmi-online.co.uk

[squowse]

I am in a similar boat. Your tax and NI bill would be about £7500 pa self-employed (22% income tax and 8% class 4 NI on income over £5,000), and £4550 from a Ltd company (dividend of £20,500 paid)

This is the reason I have a limited company.

I have done my accounts myself (I am an engineer), but they really are a lot harder than your income tax self-assessment. The company statutory accounts have to be in an exact fomat, and there are all sorts of complicated rules.
You can do it if you have the aptitude and determination. Otherwise an accountant will do the hardest bits for you for £500 to £1000.

There are also lots of fringe benefits to having a limited company. Bonus for online filing of PAYE, pension contributions free of tax and NI, flat rate VAT scheme (with no expenses this could add 7% to your income). Although you may be able to get some of these benefits as a self-employed person.

Alternatively, a company like Freelance Professional Services will "hire" you a limited company for around 5% (fees vary, there are lots of companies) of your income. This can work out cheaper if you only want it for a few months a year.

Beware IR35!

All the information you need can be found on this forum or using google.

Best of Luck

[maths]

I personally think that contributions from "non-tax" people (if i may refer to "squowse" as such) are to be welcomed.

Just one small point "squowse"; do i take it you are aware of the new "very small company" rules which penalise the taking of dividends rather than salaries from companies liable to corporation tax at below the 19% corporate tax rate.

[squowse]

I'm aware that all dividends paid to individuals must be taxed at 19% minimum (since April '04 ?). Previous to that the 0% rate was applicable for profits less than £10,000 and then an increasing rate on the whole lot up to 19%. Is that what you mean ? It applied before I incorporated my company.

ps happy to be "non-tax" !!