Blog

Advantages of a private limited company

Advantages of a private limited company

The main advantages of a private limited company or a Limited Liability Partnership (LLP) is the protection from unlimited liability in the event you can’t pay your creditors, and the tax advantages of a private limited company.

We’re going to concentrate here on just the main tax advantages of a private limited company:

  • Small Private Limited Companies (that’s with profits up to £300,000) pay corporation tax at 20% on all of their profits but individuals (sole traders and partners) pay tax at a range of rates from 0% to an effective top rate of 47% (including national insurance), on different slices of their income. So, it’s possible to pay less in tax by working through a private limited company, but it does depend on the level of your total income and hence the total tax you would pay as an individual.
  • If you have £30,000 of profits liable to 40% tax and 2% NI (meaning your total income is about £72,000), the tax & NI saving can be £30,000 x 22% =£6,600 every year on this alone.
  • Sole traders and partners pay Class 2 & Class 4 National Insurance on all of their profits, but Private Limited Companies only pay national insurance on salaries and benefits paid to the employees and directors. For someone earning £30,000 in a year, the amount of class 2 and Class 4 NI to be saved is just over £2,000.
  • You can get tax advantages of a private limited company at very low profit levels as long as you do not pay all of the net profits out of the company as salary and benefits.Advantages of a private limited company

Is there a catch? Possibly:

  • There are additional costs involved in running a private limited company such as more administration and higher accountancy fees. Although we only charge from £50pm for companies. Click here to see our fixed accountancy fees.
  • With a Private Limited Company you have to consider how much money you want to take out of it and pay to yourself. But this flexibility can be used to your advantage.
  • When you take money out it gets taxed on you personally. The two main ways to take money out are either as a dividend or as a salary and we’ll compare them more in another post, but we’re are going to assume dividends are being used as these are normally the most beneficial to small business owners.
  • Assuming you can use dividends, you don’t pay any tax on these up to your 40% tax band of £41,450 but you pay 22.5% of the gross dividend above this amount (and 32.5% for those in the 45% rate tax band). If you add this to the 20% your company is paying, it then doesn’t look so great.
  • However, if you are happy to only take income out up to the basic rate band threshold (£41,450) and leave the excess profits in the company you can pay far less tax. This means Private Limited Companies can work for people making good profits who want to reinvest the profits of their business above £41,450 into the business, or are possibly happy to leave the profits in their company until a later year when they are making less, and take the money out then.
  • Property Developers are one trade where this is often the reason to leave the profits in the company, to buy the next property.
  • If you want to get your hands on all the money your Limited Company makes straight away, the advantages of a private limited company aren’t that great.

How we can help you
We can calculate how much you could save by trading as a company. We offer a free incorporation service to our clients to help them benefit from the advantages of a private limited company. Our accounts and tax fees for companies start at just £50pcm. Use the buttons below for more details.

 

Fee Calculator

Loading...

£0

Privacy Notice

£0
* Required

Fees exclude VAT

What our clients say about us
Zafer SaygilierZafer SaygilierSayturk Ltd
I have been dealing with Paul for the past 2 years, he has been amazing sorting out my very complex and disorganised affairs in no time and has provided me with clear advice and solutions tailored to me and my operations . I would recommend him and his professional services to anyone without any hesitation."

see more

Iain CowardIain CowardBiggerbet Ltd

Paul did a great job with our accounts. He delivered on deadline with minimum hassle for us. He uses technology very well and this helps provide top-notch service.

see more

L FergusonL FergusonPaul Ferguson Electrical Ltd
I really appreciate your help, I know we pay you but you have been worth every penny and I am truly thankful for your assistance!!"

see more

Jesús CarreraJesús CarreraBitien Ltd

It took me a while to find an accountant that understands the needs of the modern times. Paul is very good at using cloud systems that reduces unnecessary paperwork (specially in printed form), and accelerate communications. My accounting and bookkeeping is less annoying now. Thanks Paul.

see more

Annie MulvanyAnnie MulvanyFreelance Show Caller

Paul was a delight to work with. Flexible, understanding and endlessly patient; I would recommend him in a heartbeat.

see more

D McIvorD McIvorBeyond the Fridge (Frome) Ltd
We’ve been with Cloudbook Accountants for some time now and would highly recommend Paul Colman FCA to any business looking for a truly enlightened advocate of online accounting and integration to online services. Having experienced several accountancy firms during my career, both large and small, I can honestly say that Cloudbook’s holistic approach to our business is by comparison the most efficient and cost effective, something we’ve long been searching for!"

see more

Anthony PearceAnthony PearcePearce UK Consulting Ltd
Good accountant with proven electronic processes."

see more

Steven TrotterSteven Trotter
Many thanks for a very fast and professional job and look forward to working with you again."

see more

Martin KruusimägiMartin Kruusimägi
It has been great working with Paul. He is punctual and accurate, but I most appreciate the fact that I can go to him with any question, no matter how insignificant or elaborate. Thanks Paul, it's been a pleasure!"

see more

Gabrielle ShegogGabrielle ShegogSimple Software Solutions Ltd

Paul has been invaluable in providing accountancy services for my small business. As a small business owner, my time is valuable and so it's great having the piece of mind that I can rely on Paul to sort out my accounts for me. He is always prompt and clear in explaining anything I don't understand and I look forward to working with him well into the future.

see more

A CuryA CuryHouse of Greenland Ltd
Since the beginning of our start up and especially during busy and pressuring times, Paul has been by our side to help us dealing with accountancy. His patience with my lack of talent with numbers was amazing - I thank him for that and would recommend him in a heartbeat."

see more

Trevor HolmesTrevor HolmesPrecise Marketing Ltd
I have yet to meet someone as meticulous with numbers and calculations as Paul. An extremely personable individual who knows his work inside-out. He is highly self-motivated, independent and efficient – all the qualities that I look for in an accountant for my business. All of my accounting needs are immediately processed well ahead of schedule. Paul plays a pivotal role in all my financing activities, which allows me to successfully grow my company. He will be an asset to any company that decides to use his services and I recommend him completely for any accounting needs."

see more

Jhem MurrayJhem MurrayJeystone Media Ltd
We have used several accounting firms in the past and switched quite a few times, but since discovering Paul Colman FCA I can say with confidence that this is the level of service and value we have been looking for all along.

see more

This is the first time I have used cloud based accounting. It has been a refreshing change. I found Paul to be extremely helpful in setting things up being a new user. Communication was done by email and i always received a response within a day. Very knowledgeable and excellent communication. And a fantastic bonus was that the service was 1/3 cheaper than what i was paying using a traditional accountant. I would without hesitation recommend Paul. Just brilliant.

see more

Mike BellMike BellJourneys To Wellbeing Ltd
Paul Colman takes all the pressure off and lets us get on with our work by taking care of the little detail as well as the big picture."

see more

Save Tax!

Pay less tax completeSign up for monthly Tax Tips & News emails and receive this FREE GUIDE

*Email:
First name:
Last name:

© 2018 CloudBook Accountants Ltd | Registered in England and Wales 08966635 | Registered Office: 44 Ruskin Drive, Newcastle Upon Tyne, NE7 7FL  Privacy Notice

Leave a message: 0191 4065 351 | Email: contact@cloud-book.co.uk | Twitter: @CloudAcountants