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Your choice of business structure will depend on a number of factors including anticipated earnings, perceived risk and tax implications.
Typically, incorporating your business can be more tax efficient but comes with an added level of compliance cost and complexity.
If you choose to set up a Limited Company, you will have to submit a corporation tax return and depending on your personal circumstances, the owners or directors may also need to submit a personal tax return.
Sole traders report their income on their personal tax return, whilst partnerships have to submit a separate partnership return.
If your turnover exceeds the VAT registration threshold, registration is usually compulsory.
When your turnover is under the threshold, you can potentially still voluntarily register for VAT.
In order to consider whether this is beneficial, you need to not only consider your purchases and how much VAT you can reclaim but also your customers and whether or not they can reclaim VAT.
There are a number of ways to operate a vehicle for business.
If the business pays for the vehicle you can offset most of the costs against your profits, but watch out for a potential tax charge on the private use.
Vehicles owned and funded privately can be used for business use and a mileage allowance is payable on each business mile at approved HMRC rates. This cost is tax deductible for the business and the reimbursed expenses are free from income tax for the individual.
Limited Companies are separate legal entities to the shareholders and directors that operate them.
Shareholders can be remunerated by way of dividends. These are paid per share and are not tax deductible for the company but usually attract a lower rate of income tax than salary.
Employees and directors of the company can be remunerated by way of salary. This is reported through payroll with the tax being calculated and deducted at source. These costs are tax deductible for the company but usually attract a higher rate of income tax for the individual.
Whether you're a new entrepreneur or a seasoned expert, it's good to get things right from the outset. Please feel free to contact us with any questions you may have about your business.