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The Difference between being Self Employed and a Limited Company

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Should you be self employed or a limited company? The difference in tax treatment and basic choice is explained here in simple english. Regardless of the structure which you go for, if you need a hand with your receipts, do contact http://www.boogles.co.uk - Bookkeeping, Payroll, Year End
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Text Comments (49)
Jonathan Simpson (11 days ago)
33% for tax and NI sounds way too high. I'm going self employed soon and it'll work out that the HMRC will be paying me back in tax because I'll be voluntarily registering for VAT. The nature of the work means that I'll be able to claim back for fuel/mileage (whichever pays more), 20% back on my leased vehicle and I could probably claim for my insurances. I'll also likely be getting an accountant and they're a "business expense" so hopefully I'd be able to claim for that. Because I'll be starting in 2 weeks time and it's getting incredibly close to January, I definitely need advice from any accountant I register with. For example; could I carry over expenses incurred from January 2018 and claim for those in January 2019 (or January 2019 for January 2020)? That's the sort of thing that's confusing and there's no point in having everything processed on January 31st. Edit: When I was employed, I was only paying between 14-15% Tax and NI combined. 33% is a load of crap.
xiaoyan ge (2 months ago)
Book-keeping
Traci S Campbell (5 months ago)
Great advice and tips on entrepreneurship....thanks for sharing
Dale Flaherty (6 months ago)
Your video is fantastic. Have you got a email I could have as I have a question regarding Ltd with CIS. Regards Dale
Beverly Pearson (9 months ago)
That's a Notts accent if ever I heard 1😃thanx for good info xx
Buzzybee73 (1 year ago)
RIP Headphone users!
mohammed ali (1 year ago)
"Up to date prices" That cracked me up 😂😂😂😂
Lorraine Browning (1 year ago)
Bit confused  what about your allowable income is this included or have you deducted this before you have started ?
Embittered Drunk (1 year ago)
Bless fam'
Hollingsworth& (1 year ago)
So wait, if I have a ltd company, I am self employed as the director. As I have employed myself? But like you said in other comments, you either invoice yourself or put yourself on payroll.
Danny O (1 year ago)
Very good presentation, relevant information. direct to point. I will hire you any day!
Roger Simpson (2 years ago)
Hello Booglesb, I found your tutorial very useful. I am a teacher who is now thinking of going down the supply route. I am now researching how to set up as a limited company instead of going through agencies. Any advice?
booglesb (2 years ago)
You can set up a limited company here: http://www.booglesltd.com/Form_UK_Company.html Seek independent advice as to what the best structure is for your situation.
Andy Tunley (2 years ago)
are you from derby?
Les Churchill Knight (2 years ago)
Great Video ;-)
Thanh Nguyen Kim (2 years ago)
At 10:53, Sorry I don't get why the corporate tax 20% (for the payroll?) is avoided by that directors send invoice of payroll back to the company. It means that the payroll/salary is not allowable expenses for tax purposes, so the allowable expense is the same between no invoice and invoice cases. Can you guide me through again? :|
Lisa Boogles (2 years ago)
+Thanh Nguyen Kim - listen to the video from about 8m 30. It is explaining that by bringing the PROFIT DOWN to nil (by adding an expense to the company), then no corporation tax is payable...because the 'profit' is NIL. The director is not 'invoicing back payroll'. The director may send his/her own company an invoice for their own service.. however REMEMBER this income that the Director gets would be put on their own personal self assessment tax return. Best thing - as I say to everyone - please do seek independent accounting advice for your own unique situation.
Tranquil Beast (3 years ago)
Thank you
thres34 (3 years ago)
all depends on total income, self employed high rate could pay 40%  or even 45%. if you lower earning go for self-employed, If you high earner go for limited
j s (3 years ago)
Great share!
Kat Maksimik (3 years ago)
amazing presentation
John Duffy (3 years ago)
As a self employed sub-contractor (shopfitter). I get taxed at sorce. So i only get the net. and then i get an accountant to fill in my self assessment every year. But i want to form a Ltd company still doing the same thing (shopfitting) . Should put down my house as the registered place for my new ltd company. How do i get paid ? can i invoice myself . confused
booglesb (3 years ago)
+John Duffy  Yes. But speak to your accountant to see if that makes sense for your situation because everyones circumstances are different. You'd have the additional burden of having to file year end accounts and a corporation tax return for your limited company. (An extra cost).
John Duffy (3 years ago)
So I (the ltd company) . Invoice the company I do work for. Instead of taking out the tax the company gives me (the ltd company)the gross. I then as a self employed invoice myself leaving zero in my ltd companys bank. Resulting in no profit. I then as a self employed shopfitter pay my 20% and NI. ?
booglesb (3 years ago)
You can put your house down as your registered place or use your accountants address. The limited company (separate legal entity) would do all the billing for the work. And when YOU, the person "John Duffy" wants to get paid, you are either on the payroll for the Ltd company, or you "JD" send an invoice to the business and get paid. Best to speak to your accountant to see if this would be a good option for you.
RED FAYNIX (3 years ago)
Thanks very much helpful and I've learned a lot and understand it better now. It's a very effective educational video
Joe La Roche (3 years ago)
It's all about ltd I was paye for 12 year what a fool I was
Mark Tierney (3 years ago)
Thanks!
Hi I'm Frazer (3 years ago)
Or is it not to avoid tax but to avoid it on paying your wages?
Hi I'm Frazer (3 years ago)
I dont get who you avoid tax by giving an invoice, I thought you said an invoice goes down as a sale... Sales are taxed... I dont understand... Unless it goes down as an expense....       Is it so everything goes down as an expense.
booglesb (3 years ago)
An invoice that you send is a sale. This will increase your income. The higher your income, the higher your net profit - the more corporation tax there is to pay. If you receive an invoice, this increases your expense, lowers your net profit - so the less tax you have to pay. Do consult an accountant or a financial person for your own individual case.
A.S. (3 years ago)
This tax system is too complicated for me when I joined an agency job. I need to know what is the best for agency worker, what tax systems is the best options? Please give me advise .
A.S. (3 years ago)
Hi thanks for the comment. I consulted freestyle accountant and they are quick to respond I had good adviser. Hopefully things will get better soon regarding my finances. Tnx again.
booglesb (3 years ago)
If you are working for an agency, then you'll be on their payroll and will be taxed at source directly from your pay check. All your tax obligations are met by your employer. They deduct it from you and pay to the government. Speak to an accountant or a tax person for your individual case.
Hugh Dunlop (3 years ago)
A more common method is for the director to take the minimum salary and take the profits (after tax) as a dividend (subject to cerain restrictions) and have dividend tax deducted from this.
Ayshea (4 years ago)
That was really well explained, thank you miss.
trident3b (4 years ago)
I lived on the continent and came to the UK. I knew nothing about the tax system. I managed to get a contracting job quickly and started working 2 days a week. I went to some agency for advice as to what to do to pay tax and among a few things was advised to get an accountant  which i did. After a few weeks the company asked me if i could then do 5 days a week. Sounded great. I agreed and did. When it came to paying the tax I was then told I was a "sole trader" and as my income went up so did the tax. I ended up paying the highest tax rate. After expenses and paying my ex wife abroad after the divorce I was left with a sum from which I hoped to replace my high mileage car with, i.e. a good newer but used car. That tax bill EMPTIED MY ENTIRE SAVINGS 100%. I    L O S T   my ENTIRE savings. It was only then was I advised by the famous "accountant" to set up a limited and then paid the 19% corporate tax, and income tax on what I withdrew which amounted to less than a sole trader. This video only shows the leap from "self employed" (as what? "Sole trader"??) to a limited. WARNING TO ANYONE ENTERING THE UK: If you are not an employee then set up a limited or get back out to a country that will give you something back for your HIGH tax when you retire!!... the UK WON'T, your pension is based on tax (!!!!) and you will lead a life of misery unless you made private arrangements and savings.
rezyc (4 years ago)
is stock classed as an expense, as in if i had 100 but i needed to re buy the stock at 50 would i then file my profit as 50 or would the tax see it as 100 still
Renold the best! (4 years ago)
Good video! simple and good enough for someone who is new this accounting world. Keep the good work up! BW
Ian Jackson (4 years ago)
If you become a Limited company, the biggest issue is the IR35. A video on your guidance to it would be great :-)
Ian Jackson (4 years ago)
+booglesb Thanks, yes, or even the IR35 office in Northampton. Too complicated for a video ! :-)
booglesb (4 years ago)
The info about IR35 is available on the HMRC website here: http://www.hmrc.gov.uk/ir35/ ... To work out how IR35 may apply to your individual situation - always best to seek advice from a qualified tax accountant.
SteveLondonSky (4 years ago)
Good video tho lol 8-)
SteveLondonSky (4 years ago)
God I HATE it when people on You Tube put up clips and say Im just putting up a QUICK video.. its bloody 20 minutes long!!! Whats wuick about that!
Small Biz Geek (3 years ago)
+SteveLondonSky Considering how complex the subject of tax is I thought this WAS pretty short. It's free advice too, are you really complaining about it?
TheBathroomGirl (4 years ago)
thanks so much for all the info, great vid .  One thing confused me, which was when the co director invoiced the company to avoid tax and you wrote this income is their sales on their self assessment. I got a bit confused about how it is income, as you're taking money out of the company, isn't it then a cost? I thought it must be a cost in order to cancel out the profit and thus the tax isn't applicable. Please explain if possible . thanks. 
booglesb (4 years ago)
Hi +TheBathroomGirl ... Remember that the 'limited company' is a completely separate legal entity from the 'individual'... so there's always two sides to every transaction... so when a company director invoices the company (or anyone for that matter)... the company will indeed account for that as an expense... money is leaving their account. HOWEVER, on the co. directors side... they're getting money IN... and this money, from the sale of their 'service' to the company, needs to be accounted for as 'sales income' on that company directors self assessment statement. If the director did not account for any of his/her income coming in, this would be dodging tax. I hope that helps. Sorry if I didn't make that clear in the video.
quentin ginsburg (5 years ago)
Thanks that was well explained !
Sunny31174 (5 years ago)
brilliant video. thank u

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