*Loan,banking and credit>>>tax advice

Working freelance - advice needed on tax (UK only)?

I have been working for a year and a half as a freelance technical writer/editor. This has been very part-time to start with and annual earnings were small. I paid a small amount of tax in 05/06 as a sole trader. Recently, I have gained a new contract and my earnings have risen. At what point does it make sense to set up my own company and run things on a more formal basis? Are there up-to-date websites/books that are good sources of information?

well at 10k income its not worth it imo. but you could still save a little money by setting ltd company if you did the paperwork yourself as paying an accountant to do company stuff is quite expensive and would outweight the tax savings you would make. also im assuming you will have numerous contracts throughout the year as if you only have 1 or even 2 then you will be caught under IR25 legislation and you would pay additional tax similar to a sole trader.

the benefits of trading through a company is that you can pay yourself dividends which you only pay 10% tax on.

for example you pay yourself a basic salary of say 拢5035 which is the basic allowance and will be tax and ni free. you then pay the rest of your profits as dividends and only pay 10% tax on it.

as a sole trader you would pay 10% of the first 2k of profits over the 拢5035 amount and the rest of your profits at 22% therefore you wouldsave on tax. plus you pay about 拢2.10 a week class 2 NI and also 8% class 4 ni on profits over 拢5035. so overall you could save ya self 拢500 ish a year.

if your married,your spouse could also own shares and pay her dividends to or even pay her a nominal salary as long as you could prove she earnt it, she could do the bookkeeping or the company secretarial work. or at least you could say she does.

the Inland revenue are cracking down on husband and wife companies at the mo so have to be careful how set up. Source(s): 10 years as practice accountant and 5 years tax senior

I am a freelancer myself, and am registered with the Inland Revenue as Self employed. I run things really formally, and am well organised in my records. It may not be a legal requirement per say, but it makes good business sense.

A technichal writer should NEVER require to become a limited company, as they work just as well as a freelance self employed person. As a business Writer, being a limited company would just create an un-needed hastle.

Unless your turnover is VERY high, ie in the 10 thousands region, it is both easier and possibly better to remain as a sole trader.
I agree that you are much better off staying as a sole trader.
There is nothing to stop you running a company and being formal as a sole trader.
Many sole traders t/a (trading as) a company name.
I am a sole trader and trade under a company name, have a professional website, headed paper etc etc etc. Just the same as any other company. Sole trader does not mean amateur. It's just one of the types of legally permitted company formats.