Limited company or soletrader

I am currently freelancing and working full time. It is getting to a point where I want to consider moving into freelance full time. An aspect of this is deciding whether to become a sole trader or limited company as I understand it in the UK.

Does anyone have experience with either of these or any resources that are particularly good that deal with this?

What are your experiences? Particularly if you are in the UK.

Most clients would prefer to work with a limited company than a sole trader. You need to make sure the few bucks you save NOW by going the sole trader way is really worth it.

Awesome, thanks for the replies sorry it took me awhile to get back. I think I will probably go for a Sole Trader initially and see how things go.


Well that’s a good thing at least! I remember my first Ltd start-up back when I was 16 years old… boy did i get some funny looks from the formation place I went too (apparently I was the youngest person they had encountered wanting to start-up a Ltd in my region), that secretary thing was a pain though! :lol:

BTW, setting up a LTD Company is very easy these days, and doesn’t really cost much. An accountant will do it all for you for a couple of hundred quid including all set up fees - literally takes an hour to set it all up.

As for tax savings, you’ll see most tax benefits if, as a sole trader, you are currently earning between £20-£50k. Savings will be in the region of £2-3k a year, more if you throw in pensions and health insurance benefits etc.

just give a try to earnbizz that pays well no hassle

That requirement was removed quite recently, in fact, as a result of new provisions in the Companies Act 2006 that mostly came into effect in 2009. You don’t now need to appoint a Company Secretary if you have a private Limited company, although you can if you want to. A sole director can now also act as Company Secretary.

Starting a private Limited company in England and Wales has never been simpler!


I agree with the above, though I would say being a sole trader may appear more favourable if you’re just testing the water or getting started. Yes you do take on more risk as you’re personally liable (though you can get insurance to cover you in that respect), but the benefits are less paperwork and a simpler structure to your business. I went as a sole-trader in preference to LTD because (for me) I was working solo (as far as I am aware, companies house still require a second individual to be the secretary - so you can’t just be a single person entity) and because my business wasn’t turning over a huge amount. If you were going to be turning over a large sum (like six figures a year) I would definitely recommend going LTD whatever for the liability protection (et al) - you can easily go LTD in your own time. :slight_smile:

This site has lots of useful information:

Setting up a LTD means you limit your personal liability, so basically in most cases, it is the company that gets sued, not you. It’s not a complete get out of jail card, but it’s much much better than your liability as a sole trader (i.e. should you get sued, you could lose all your personal assets including your home).

That alone makes it worthwhile IMO.

From a tax POV, it’s also a no-brainer in most cases. You pay yourself £540/month in salary, then take the rest out as a dividend. You effectively pay no tax and very little NI. The company pays just 21% on profits (i.e. after your salary) and a little employers NI. This compares favourably to the taxes you pay self employed.

Plus if you have a wife or partner, you can employ them and also have them as a shareholder to receive dividends. There are other tax advantages - pensions, health insurance etc. Well worth contacting an accountant who specialises in dealing with small LTD company set ups

Just be aware that you have a bit more paperwork, but after year 1, it’s pretty simple and not much different to being self employed. There;s more legal responsibilities, but if you are organised and well advised, it isn’t a problem.

I recommend you get an accountant to deal with all the tax stuff (e.g. companies house returns, corporation tax return, maybe a bit of PAYE although the P35 is pretty simple to do online etc) - probably cost you £100 a month.