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If you’re looking to work for yourself, then you need to choose between becoming a sole trader or setting up a limited company.
Each has pros and cons.
If you go the limited company route, then you need to decide how to pay yourself:
Winner: limited company, but not by much – mostly because you have more freedom in how you pay yourself and what you can expense.
This is one of the biggest differences.
This is why most one-man-band limited company directors prefer to pay themselves only enough salary to qualify for State Pension, and the rest as dividends.
Winner: sole trader.
Sole traders only need to file a Self Assessment tax return once a year:
If you do business through a limited company, then you need to:
Corporation tax returns are much more expensive and you’ll also need to deal with bookkeeping or hire an accountant to do it for you.
Winner: sole trader – by far.
This is another huge difference:
Winner: limited company – but only if you need business insurance or a business loan.
You can easily do it.
We recommend to start small as a sole trader and, if your business grows, set up a limited company later on.