It was reported that the way dividends are taxed is set to change from today, and will affect sole trading and Ltd companies alike. So we decided to give you a rundown into what they both have to offer, which will give you a good indication in what choice is right for you.
Sole Trader
Being a sole trader is exactly what the name suggests. Everything is taken care of by you, from keeping records of your businesses’ expenses and sales, to sending a self-assessment tax return ever year. Your business is owned as an individual and classified as self-employed. There are many financial pros and cons you need to take into consideration about being a sole trader.
Pros:
Cons:
Limited Company
Running a limited company is ideal for the structured and corporate minded business person. This means shareholders are responsible for the company’s debt. Financially, there are positive and negative aspects.
Pros:
Cons:
The Numbers
Below are tables that give a good indication of the differences between sole trader and Ltd company, before and after the changes.
2015/16
| Profit | Sole Trader | Limited Company | Difference |
| £30,000 | £6,000 | £4,388 | £1,612 |
| £40,000 | £8,900 | £6,388 | £2,512 |
| £50,000 | £12,790 | £9,053 | £3,737 |
| £75,000 | £23,290 | £19,053 | £4,237 |
Source: www.smallbusiness.co.uk
2016/17
| Profit | Sole Trader | Limited Company | Difference |
| £30,000 | £5,920 | £5,109 | £811 |
| £40,000 | £8,820 | £7,709 | £1,111 |
| £50,000 | £12,630 | £10,209 | £2,321 |
| £75,000 | £23,130 | £21,462 | £1,668 |
Source: www.smallbusiness.co.uk
This should give you a good indication of what is financially viable for you, so you can get started on your search for a commercial property.
