A Limited Company is a cheap and convenient mechanism that provides an extra layer of legal protection and many tax benefits for a self-employed individual. Setting up such a company is now easier than ever, and it provides a wide variety of benefits.
Tax Benefits and Implications
Having a Limited Company makes it easier to pay the VAT and Pay as You Earn (PAYE) income taxes. It can also reduce your tax bill; under current regulations, the first £8,105 in earnings of a limited company director is tax exempt.
Unfortunately, there are serious tax implications to running a Limited Company. Limited Companies are required to pay the VAT, National Insurance, Corporation, and other taxes. They also have to file an annual return with Her Majesty’s Revenue & Customs (HMRC) by May 19 and report all benefits and salaries paid to directors.
Fortunately, it is possible to set up a simplified scheme with the HMRC to take care of the taxes. A chartered accountant can help you set up such a scheme when you form the Limited Company. The process is actually quite simple because all that is required after registering is to set up a bank account.
Creating a Limited Company can protect your family’s income and assets, such as your house and car, from debt obligations and liabilities that arise from the business. Because the Limited Company has its’ own bank account, the bookkeeping and tax reporting process is simplified. Tracking expenses and revenues and paying taxes becomes a simple procedure.
The accountant can handle all of the necessary reporting and dealings with the HRMC. The cost of such services is quite low, and many entrepreneurs find that the savings from reduced paperwork more than makes up for the cost.
Contrary to popular belief, you will not have to issue shares to anyone nor hire a secretary to set up a Limited Company. All you need to do is appoint at least one director; you can serve as the director yourself and function as the shareholder. You don’t even need a partner.
Creating a Limited Company has never been easier or more beneficial for a self-employed person. If you are interested in hiring a quality IT contractor accountant, visit www.nixonwilliams.com/IT-contractors.