Sole Trader vs Ltd company

[Dazh09]

Hi, not sure I've posted this in the correct section here but I'm after folks opinions on which is the best business model when starting up sole trader or Ltd company, reason being I got talking to a bloke while on a training course who enlightened me on a lot of interesting facts about becoming a Ltd company.
Firstly he explained that if I took the Ltd company route I could pay myself a yearly salary just below the tax threshold of around £10,000 completely tax free but would liable to N.I of around £275 , then I could pay the rest of my wage as weekly, monthly or annually dividends which are only taxed at 10% thus paying far less tax than the sole trader route, I could also get my partner on the books and pay her £10,000 tax free too.
He went on to explain that as a Ltd company I would have to pay 20% corporation tax on profits but from what I understood this was on any remaining profits after costs I.e wages etc have come out, apparently this is the new trend of how directors of Ltd companies pay themselves?

 

[gasmanrob]

This is true but be very careful of adding your partner on to the books.

it falls into the avoidance category whilst not wrong doing it's still frowned upon they will tolerate you receiving it but might question why your partner who only works an hour a week delivering paperwork earns the same wage as the director doing all the work. And if your paying someone they must actually do some work.

and it gets even more complicated/muddier waters if you are a long term contractor at a single place of work as you could be viewed as an employee in disguise.

 

[lame plumber]

need to be earning enough to make ltd worthwhile in the first place!

 

[Chalked]

Apparently, 26 k(profit) is the break even point. Above that you need to be ltd. below, sole trader .

 

[Jimbob]

I'm in the same boat, always been a sole trader but been advised to go ltd, for the above reasons.

Plus points I see are, maybe a reduction in tax and if things happens to go pete tong, they cannot take your house. Downside seems to be difficult to get credit in your early days of trading without being a guarantor. And extra business expense.

 

[Dazh09]

Thanks for replies, I did a bit of research online and what he told me all seems accurate, there are a lot of accountancy websites that explain in more detail.
As for putting a partner on the books, you would infact make her a director too (providing you trust she won't leave you one day) so straight away you would have £20k tax free going into the same household.

 

[dave1]

I've been trying to look into this at the moment too, as I'm looking to go self employed soon. Thanks for all the info.