You don’t have to create a limited company (“ltd”) in order to work self-employed.
Setting up a ltd company you’d have to comply with various legal requirements including have a Director, company secretary, Companies House registration, set up PAYE for any employees (i.e. you) and keep company accounts (although presumably you would qualify for the small businesses accounting regime). But you create a separate legal entity from yourself for financial purposes (that’s the real point of creating a limited company).
Alternatively, you could simply engage in self-employed work as a sole trader. No PAYE, no setup legal requirements (other than notifying HMRC that you are undertaking self-employed work as a sole trader). Simples.
Downsides? There’s no separate legal entity from yourself – you ARE the business. You pay National Insurance contributions directly from your earned income (because there’s no PAYE for sole traders) and therefore no ‘payroll’ – your tax position isn’t dealt with by ‘codes’, you complete a self-assessment form on the back of your ‘sole trader’ accounts (which I’d strongly suggest you have drawn up by an accountant) and pay your tax in two lump instalments – end of January and end of July. So remember to save some of your self-employed income to pay these.
Minimising tax? When you set yourself up as a sole trader, I’m sure you’ll need to buy all kinds of things in order to operate your business, which (please speak to an accountant) you can probably write some/all of as against your tax liability 😀
