Posted By Linda Crossland-Clarke
Hi

I can't offer any advice on composite.

In really simple terms...

With a limited company, you get a bigger tax allowance, as the company is earning the money and not you. The company can bring around £10k before it starts to pay tax.

As a sole trader/employee you are allowed to earn around £4k before you start paying tax.

So you can pay less tax through going limited. If you then pay yourself a low wage, you pay less tax again - as you're earning less (works out better for NI cotnributions too) - then as a company director you can pay yourself infrequent dividends (so they can't be construed as wages) from the company profit, and this has less tax implications too.

As sole trader or ltd company, you can claim all your expenses, so meaning your living expenses are not as high, hence you can pay yourself a lower monthly wage.

You can also have your company pay your pension, instead of paying it out of your wages - I am told this is more tax efficient too, as with private healthcare and the like.

As I said this is really basic info, and other people may be a bit more up on maths/tax than I am. I have an accountant!

Regards

Linda