What are the basic tax differences between being a limited company and as a sole trader?
When the taxable profits exceed the rate at which income tax is levied at the highest rate (40%), the total tax and National Insurance (NI) cost borne by a small limited company is likely to be lower than a comparable unincorporated business. A further advantage is that company profits do not attract NI. So there may be good tax and NI reasons to incorporate your business. There may be capital gains tax implications when transferring assets from an unincorporated business to limited company. However there are other factors to consider such as having to file accounts at the Registrar of Companies and an increase in paper work. A chartered accountant can advise you about whether incorporation is the right thing for your business.
