I set up a limited company over twenty years ago to handle an element of my earnings, Originally it was to take advantage of tax breaks and take dividends tax free up to £5k per annum. I had the same accountant virtually all of that time who served me very well. He dealt with all my personal and company tax, I manage the VAT.
If you are a high rate taxpayer now then in my view the benefits are less attractive nowadays, The tax free element of dividends is now £2k and above that your personal tax on the dividends you pay yourself is 32.5%. That is after corporation tax on company profits. However my earnings in semi-retirement are now much more modest and I also use the company as a way of obtaining very nice technology with the benefit of tax write down and VAT reclaim. I anticipate closing the company in the next year or two, possibly after upgrading my desktop Mac. All necessary business expenses of course.
With less tax benefits, accountants fees (£750-1000), separate bank account and fees, professional liability insurance (£150-350), admin hassle (especially VAT) I would not do it again now. I got caught for late payment of a tax bill some years ago - a £1600 fine! My fault entirely. I certainly would not contemplate doing it without a good accountant onside. Bearing in mind of course that if your accountant suspects a tax fiddle they are legally obliged to report it to HMRC and not to tell their client on pain of prosecution.
I would note that this a layman’s interpretation of what I understand to be the case. I could well be, and probably am, wrong in whole or part.
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Limited Company - Netsur
