Is it better to Register as Self-Employed or a Limited Company?

If you want to set up a business in the UK there are several options open to you. Having the choice is good, but it can be a little confusing, so here we will look at the main pros and cons of each option.

The Pros of Registering as Self – Employed

First the pros, setting yourself up as self employed is stunningly simple.

You just need to register the fact you are working for yourself with the tax office. To do this, go to the HMRC website.

If you expect to be earning over £5,595 per year you will have to pay Class 2 National Insurance contributions. Once again, you can register to do so via the HMRC. You will also have to set up a Direct Debit agreement.

Registering as self-employed is free. If you set up an Limited company without any assistance, the cost is £15, but if you want to use your own articles of incorporation, it can be tricky for the layperson to take care of the registration themselves. As a result, many people end up paying a specialist to do it for them. You can recommend somebody. It is a bit more than £100 and well worth paying.

The Cons of Registering as Self-Employed

However, there is a major potential problem with registering as self-employed. If anything goes wrong and you find yourself being sued your personal assets such as your car, savings and house can be seized to pay any compensation that is awarded.

Other Differences Tax and Employees

Any profit generated from the sole trader or self-employed business is viewed as income and is taxed accordingly. For an Ltd company things are different. They are a form of corporation, so have to pay corporation tax.

Understanding the two tax regimes, the various bands and how they are applied, is important when deciding what kind of business structure to use. How employee’s tax and National Insurance is dealt with is also slightly different.

Making the Decision

It is tricky to understand all of the tax and employee responsibilities under each regime. Therefore, if you are thinking of working for yourself it makes sense to consult an expert lawyer like Hylton-Potts. We have the latest information and the experience to let you know if you are better off setting up an Limited company or registering as self-employed.

Hylton-Potts also provide a service to help you register a Limited company for a low fixed fee price. For more information and to get started, you can download and fill in the form and return it to us.