EXAMPLE

First Year of Trade
Sole Trader
Limited Company
Net Profit
£15000.00
Personal Allowance / Director Salary
£10000.00
Taxable Income
£5000.00
Corporation Tax @ 20%
£1000.00
Income Tax @20%
£1000.00
Class 4 NIC 9% (15000-7755)
£652.05
Class 2 Stamp (52 Weeks @ £2.75)
£143.00
NIC Employees
£245.28
Formation Fees
£45.40
Accountants Cost of Formation
£250.00
Accountancy Fees
£400.00
£1000.00
Tax Saving on Increased Fee’s
-£170.00
Total First Year Costs to 31st January 2016
£2370.68
Plus Additional Tax Payable On Account at 31st January 2016
£862.03
Comparable Cash Position
£3021.08
£2370.68
Tax Payable 31st July 2016
£862.03
Nil
Second Year of Trade
Sole Trader
Limited Company
Net Profit
£18000.00
Personal Allowance / Director Salary
£10000.00
Taxable Income
£8000.00
Corporation Tax @ 20%
£1600.00
Income Tax @20%
£1600.00
Class 4 NIC 9% (15000-7755)
£922.05
Class 2 Stamp (52 Weeks @ £2.75)
£143.00
NIC Employees
£245.28
Accountancy Fees
£400.00
£1000.00
Tax Saving on Increased Fee's
-£120.00
Total First Year Costs to 31st January 2017
£3065.05
£2725.28
Plus Additional Tax Payable On Account at 31st January 2017
£2131.02
£1600.00
Comparable Cash Position
£3500.05
£2725.28
Tax Payable 31st July 2017
£1261.02
Nil

Sole Trader

Main Advantages
Disadvantages
- Total control - Personally liable and accountable for all your businesses debts
- Business affairs are private - Can be difficult to raise finance
- Keep the profit - They can offer a more personal approach
- Easy to change to another trading Identity - Can be difficult to enjoy economies of scale

The reasons why sole traders are often successful are:
1. A smaller business can have closer contact with their customers and Suppliers and develop a close relationship
which gives a high level of service and customer care.
2. Very closer to the customers that allow them to react more quickly to their needs than a larger business.
3. Sole traders will be closer to the local community and can develop good business relationships with their
understanding of the area and local knowledge.

Limited Company

Main Advantages
Disadvantages
- Limited liability - More cost (Formation Fees and Accountancy Fess etc)
- Tax efficiency (Due to dividend) - Less privacy than unincorporated businesses
- Secure prospect to investors - Any losses generated by a company, belong to the company
- Looks bigger and more professional. - Audit requirement if exceed the certain limit

 

We are happy discuss your individual requirement and help you make right choices.