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Sole Trader or Ltd Company?

Let's find the main differences between whether you should set your business up as a Sole Trader Business, paying Income Tax or a Limited Company Paying Corporation Tax.

What's the difference between a Sole Trader and a Limited Company?

There are quite a few differences between a Sole Trader and a Limited company, and which one you set up as is crucial, as going from one to the other can be costly and time-consuming as I am finding out!

The main differences between a Sole Trader and a Limited Company.

As a Sole Trader, you are personally liable for the Business Debt, with a Limited Company your Personal Liability is Limited.

This is an important part of the difference, as when you are a Sole Trader you and your Company are seen at the same entity.

When you are a Limited Company you and the Business are legally separate entities!

How easy is it to set up a Sole Trader Business compared to a Limited Company?

Setting up as a Sole Trader is relatively easy, all you need to do is go onto the Government Website and they walk you through the process step by step.

The same is said for a Limited Company, but there are a lot more regulations that need to be followed. The Government Website has a step by step guide.

What do I have to file as a Sole Trader compared to a Limited Company?

As a Sole Trader, you do not need to file anything publically, all you will need to do is submit a Self Assessment Tax Return once a year. More information on what you need to put on your Self Assessment Tax Return can be found here.

I would always recommend doing this online, rather than via Paperform! Especially due to the New Making Tax Digital rules that come into play in April 2023, read my blog all about it here.

These are done for a 12 month period from 6th April to 5th April each year.

We offer a support service for Sole Traders, so guide them through the Self Assessment Process, via our Monthly Membership.

As a Limited Company, you need to file Account's Annually, and pay Corporation Tax on your Profits.

These are done for a 12 month period, but this 12 month period is set by you.

For this, I would always advise getting an Accountant, or qualified Bookkeeper involved, this can be complicated and you need to ensure that you submit the right information at the right time.

This is a service that we are able to provide under our Virtual Finance Department Packages.

Other Advantages and Disadvantages of a Sole Trader Business

It is less regulated, so it's easier to just get on with business!

You have a £1,000 allowance, which is available for those who have not earned over £1,000 in turnover you do not need to register as self-employed and submit a Self Assessment Tax Return.

This allowance is available to Trading and Property Businesses, read more about it here.

Tax Planning can be difficult, and so can be reducing your Tax Bill, you pay standard Income Tax on your Profits.

Raising Money for the business can be tricky!

Other Advantages and Disadvantages of a Limited Company

You have a better chance to Tax Plan, to reduce your Tax Bill at the end of the year.

You become an Employee of the Business.

Your Business has more credibility.

Lenders may ask for personal guarantees on business loans.

If there is more than 1 director in the business, it can be a tricky situation if there is a disagreement.

How can I find out which route is best for me?

There are loads of resources available online to help you decide which is best for you and your business.

Here are a few links to articles that may help.

The Accountancy Partnership

If you have any further questions

Please feel free to email me at or

Give me a call on 07709092841

Or book in a Zoom chat here

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