Have you looked at http://www.startups.co.uk/aMIYBBU.html the main start ups page. There is some really good info!!

Sorry I'll try again, I mean in relation to paying tax on income, I see a figure of just over 4K quoted as an income you do not have to pay tax on, you make it better by paying yourself? dividends in a Ltd company. How is this better than being a sole trader/partnership, this is the part I don't understand.

I am sure James or Barr is better placed to advise, but basically as you look at it, being a limited company is better from this point of view. However, there is more paperwork involved, which needs to be audited by an accountant. There are strict procedures that need to be followed, and I am sure somewhere along the line you will still lose the money to the inland revenue. Remember as well, corporation tax. Regards, Richard Retail World
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Regards,
Richard
Retail World - Supporting Retailers Across the UK
www.retailforum.co.uk

Its quite involved, but what you have to understand is that a limited company is a separate legal entity to the person(s) who own it, and there are different ways different types of incomes are taxed. This is what gives the variations between one method and the other. Taxes are paid on the company profits, and possibly on taking money out of the company depending on how you do it and the level on income of the owner. A sole trader is the same legal entity as the business owner, and you are taxed in a similar (but not identical) way to an employee. Without getting into complex math, assuming a typical scenario of having a ltd co. and no other income vs a sole trader, it is generally beneficial to run a ltd company from a pure tax point of view once your profits reach £15k as the £1k per annum saving will more than offset the additional administration costs. I wouldn’t worry too much about the in/outs of this at the planning stage, and in practice it is your accountant not you who will do the actual sums. If you do a search on this topic is has been covered quite a few times in the past looking at the various aspects. I suggest you talk through the various pros and cons with your accountant prior to launching your business before making a final decision. If there are no overiding reasons for immediate incorporation generally speaking there is a lot to be said for being a sole trader whilst testing the business model, and then incorporating if you are successful. Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Always on cue James!
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Regards,
Richard
Retail World - Supporting Retailers Across the UK
www.retailforum.co.uk