Thinking of registering with Companies House at the start of my new tax year.

I know a fair amount and what I don’t, I always research.

However – any views on pro’s/con’s/tax etc would be appreciated.

Also – at the point of changeover, does the sole trader business cease to exist and the Ltd Company starts, or is there a degree off crossover between the two?

Obvious really, get a good accountant, keep on top of your accounts regarding simply inputting expenditure and income, keep mileage records etc.

The cross over should, in my opinion effectively be taken over by the Ltd company. That’s what I did rightly or wrongly with expenditure stopping for the sole trader side of things and any payments coming in going to the ltd company even if earned by the sole trader days, my accountant didn’t seem too concerned anyway.

Pay yourself just below the tax threshold. Take the rest in dividends.
Claim the tax back on business related stuff, hotels, cars, clothes etc.
Do it right, legally with a good accountant and it’s win win.
Can be a pain getting mortgages, credit etc until you’ve traded for a while.

Aren’t you supposed to pay yourself a salary of 7 to 10K and take the rest out in dividends ? 😉

Afaik there’s no “changeover” as such, I think you just need to tell the revenue when your sole trader business finished (and tell the NI people too) and then when your employment started with the new company or when you started trading under that name.

Once the company is set up with CH the revenue should send details of PAYE references etc and important dates (like corporation tax deadlines and accounts due). If you have an accountant they should do all this for you. Most likely for an exorbitant fee 😉

Pay yourself just below the tax threshold. Take the rest in dividends.

Be careful with that as, if you pay yourself a monthly dividend, the tax man will class it was salary, potentially.

Avoid this by paying dividends a few times a year.

And yes, the most tax efficient way is to pay yourself a basic salary (2013-14 is £641 per month) and then draw down dividends for further income. You can do the same with any other shareholders/employees too (your partner for instance if they don’t have other income). That way you will make use of their tax allowance and pay corporation tax rates on any profits after expenses.

A major difference is PAYE. You’ll need to set up a PAYE scheme for the company, and submit monthly returns online.

Plenty of good advice up there.

I’d suggest an appointment with an accountant with your last few years books. He’ll soon tell you if it’s worthwhile. There are also some legal advantages – not sure what kind of liabilities you could incur if you **** something up (not that you would of course 🙂 ). Also check out things like transfer of your truck to the new business…all sorts of technicalities like that can end up costing you money.

Expect your accountancy bill to rise significantly too as they’ll be handling monthly PAYE, year end company reports, P35, corporation tax and personal tax return submissions (mine went up four fold!).

But if they can save you a decent amount of tax, it’s worth it.

You’ll need new bank accounts too.

You probably already know that the ltd company pays corp tax on the adjusted profits most likely at 20%. It is best to take a monthly salary* between the lower and secondary NI bands which qualifies you for benefits without actually paying any NIC’s. The rest of the profits after corp tax you would take as dividends creating the most tax efficient way of getting an income from the business. As already pointed out you’ll need a PAYE scheme setting up which will need to be submitted to HMRC on each payroll run under RTI system.
* You need to remember that you can only reclaim income tax on your pension for earned income which dividends aren’t
When you go limited the sole trader business ceases. The trade debtors, creditors and assets including stock can be transferred to the limited company. This should create a situation where the limited company owes you money. This can be drawn down tax free as it is basically a loan from you to the company. You can charge interest on the outstanding balance but must declare that interest received on your tax return as taxable income.
Any loans for assets etc you bought as a sole trader you would be still liable for and most lenders wouldn’t allow you to transfer it to the limited company without you being a guarantor. The same with suppliers who may not give credit terms to a new limited company before they built a trading history regardless of if you gave been a customer of theirs in the past.
You must remember that you are the custodian of the company and can’t treat yourself in preference to your creditors i.e. paying yourself at the expense of not paying a supplier. Plenty of directors have been prosecuted for this by the liquidators and the creditors.
Like others have said get a good accountant.

I’m no accountant, but I believe you can sell the ‘good will’ to the limited company as well.

I cannot stress this enough go and see a qualified accountant and pay for some proper advice. There are all sorts of issues to consider both tax and commercial as well as fiduciary and other responsibilities under the companies act, your obligations are more complicated as a director and some of your company (or llp’s) information will become public.

If you incorporate the business it needs to be done properly to save subsequent tax and potential personal liability issues.

The correct thing to do and how to do it will be highly dependent on a vast array of factors some of which are personal to you.

Also exercise caution on the dividend point. There are very specific requirements for paying dividends relating to accounts and realised profits. Ignore at your peril.

Second the ‘good will’ bit up there.

If you have an established client base for example, this can be ‘sold’ into the Ltd company.