I was wondering whether or not there is a limit to income that can be earned as a sole trader before you should open an llc company?
No limit as such however
Certainly once you get profits above the 30k+ mark the limited company starts to look appealing from a tax perspective **- particuraly if you have spouse or partner that may be active within the venture or say you are adding material amounts to your pension.
Above the 50k+ mark the savings can be very material particularly if you don't need to sepnd the profits earned immediately.
Unfortuantely if you make mega money and want to sepnd it all then things can strangely swing back in favour of sole trader at higher marginal rates - but that is prob ably only really an issue if yoju are a mega earner who wants to spend it all.
** marginal rate of tax sole traders from say £12.5k upover up to higher rate (50k) is 20% tax + 9% NI = 29% - for limited company effective margin rate is 25.1% - if we say £1k profit 19@% corp tax 810 dividends = 7.5% personal tax on those dividends £190+60.75 = £250.75.
Ref pension payments you still get billed 9% NI even if you add to pension whereas with company providing its a "company contribution" into your pension you can get 100% of profits earned into your pension up to reasoably generous limits.
Taking the figure of £100,000 as an example, is it unusual for a figure this high to be put through a sole-traders self assessment?
I don't know the exact stats but i would guess over 50% of people go down the company route at that level (would others agree? i would say its well over 50% for people i know) - savings though are very dependent on circusmtances but are likley to be real and meaningful - for example if you have basic 31st Match year end and dont particularly need access to profits earned or have decent value of net buisness assets to swap to company then if you went limited now you could potentially remove Jan-March profits from your ye 5/4/2021 perosnal tax comps.
Note if your income exceeds 100k effective rate of tax ups to 60% for next 25k , as you also lose your personal allowances in that income zone - so at a minimum you should at least be doing some basic tax planning - eg adding extra to pension this tax if your are over 100k below 125k is very tax efficient.