Becoming a freelancer – setting up a limited company

When making the decision to become a freelancer, you have two options. You can either set up as a sole trader or start a limited company.

Both options come with their own unique opportunities and challenges that need to be carefully considered before a decision is made.

For many, the advantages of a limited company work better for them and their freelance career.

Perks of starting a limited company

Drawbacks of starting a limited company

Other considerations

As well as the above-mentioned pros and cons, there are other things to consider before choosing to start a limited company.

The way that you pay tax will be in two different ways – Corporation Tax will be paid on profits, and any salary or dividends that you take are subject to personal tax. This is often beneficial if you have a larger income, as Corporation Tax rates are generally lower than the higher rates of Income Tax.

You may also need to consider VAT, as VAT registration is mandatory if your turnover exceeds £85,000.

However, registering voluntarily before that threshold can have advantages, such as reclaiming VAT on business expenses.

You must also be stringent about keeping records of your company’s finances to comply with your reporting requirements.

Whilst you can keep your own records, many opt for an outsourced accounting professional to organise it for them.

If you would like help setting up finances for your limited company, get in touch with one of our experts today.