When going self employed, the dilemma  that prospective entrepreneurs face,  and the question  that is most commonly asked, is whether to  start a limited company or to become a sole trader.  Thanks to economic freedom we can make  choices, which we should exercise with courage and careful consideration of  material and immaterial consequences. With overheads,  expenses and risks involved in running a business,   it is only prudent to look into a matter of taxation, when going self employed. As we know,  in business, what counts the  most is  what we are left with for re-investment and what adds to our own prosperity,  so apparent when one is successful.  With an increasing sensitivity to taxation in recent years, due to the growing  number of  socio-economic factors and the growing proportion of self -employed,  one should consider his options now through a different perspective. The sheer  comparison of basic advantages and disadvantages of sole traders and limited companies, is no longer a deciding factor when going self employed. Obviously, a limited company is always in a better position than a sole trader when it comes to raising capital, therefore it is more likely to expand.  However one of the biggest advantages of running a limited company is  its restricted liability  for its debts.  Limited company  members are liable to pay off the debts only to the  amount of unpaid shares to which they originally agree to be liable.  In comparison, a sole trader is responsible for all the debts incurred by the business, and may have to sell personal assets, including his/her home, to meet these debts.   However the real  perk of running a Limited Company, on which I would like to focus, is taxation. A Limited Company  is subject to  steady taxation at 20%. In addition, directors can draw the benefit  of taking a 'directors' loan', which however has to be repaid within a time scale, in order to avoid further repercussions. In turn, sole trader's taxation depends on the band his/hers income falls into. Currently: basic at 20% (0 -33,500), higher at 40% (33,500- 150,000) and additional rate at 45%(over 150,000)  https://www.accountingweb.co.uk/community/blogs/goweraccountants/changes-to-self-employed-tax-rates-in-2017 In the course of its activities, both sole trader and a limited company are entitled to claim tax reliefs aiming to support their efforts as well as  playing an encouraging and collecting tax role. Legislations are changing year on year, and because of their fine balance it's worth considering whom the changes will  serve better: self employed sole traders or limited companies.  If we take for example recent decrease of Dividend Tax Free Allowance we will clearly see that the changes  hit a basic tax rate payer.  https://www.yourtaxassistant.com/2017/04/happened-means-means/  Also,  considering  Buy to Let tax, it is easy to notice that Commercial  property has not been affected by Buy to Let taxes - the choice of large institutional investors.  In fact, none of the legislative changes will affect  large limited companies,  instruments  of wealthy investors along with Trusts. The Government is happy with the wealth that investors  bring into the country.  And if those large companies can eliminate  their tax liability through extensive planning and knowledge of regulations, so can small and medium   companies too. When going self employed this must be considered. Thanks to economic freedom we can make choices.

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When going Self Employed
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