Uncovering the myth “Become a limited company……it saves you tax”

If I had a £1 for every time I hear this I would be able to retire. Frequently it is said to me that “my mate says I will save tax if I am Limited”. My response to this statement is always “can you ask your mate how that is possible as I would love to know!”

The reasons for deciding to become a Limited Company over that of a Soletrader varies on a number of factors and tax savings is generally not one of them. Establishing as a Limited Company may save you some income tax however it introduces a new tax, Corporation Tax and potentially Employer’s NI (depending on how you are going to extract your income).

The decision on business structure is much wider but what I would say is speak to an expert, we can advise on what the implications for each scenario are and also the tax implications. Each business is different so understanding the implications is key.