The new fiscal year starts from 6th April and with the economy starting to show positive growth, your potential profits are likely to rise and so will your tax liability. Now is the time to review if your legal, (Trading), status is best suited for your individual financial circumstances.
If as a Sole Trader your net profit is £20,300/annum and you have a partner who is not currently employed, in just five years you could save around £10,127 in tax though a change to a Limited Company. As your profits rise these savings are enhanced.
If you were thinking of setting up your own business with projected profits of £40,000/annum, you could save around £9,950 tax over five years by having your own Limited Company.
Each Director of the company can withdraw up to £38,474 in a year without paying any personal tax. Above this amount you enter higher rate tax but would still only pay 22.5% additional tax compared to a Sole Trader who would pay 41% tax on personal income above this level.
The Company can also be used to fund long term savings by investing directly into a private pension which is tax deductible to the company.
With a “balanced” risk pension fund offering tax free growth of 9% this year and with corporation tax relief of £1K for every £5,000 invested, you can quickly build tax efficient funds for the future.
There is a number of tax planning opportunities available to Directors of Limited Companies to ensure that they are making the most of enjoying the profits.
We can help you with every aspect of the decision process and guide you through the implementation process.
If you would like to arrange a free and no obligation initial consultation at our office then please contact us>>