Many SMEs start off as a sole trader and then change to a limited company as their profits start to grow. As a rule of thumb, once your profits are £30k or so, it is likely that incorporation is a good idea, to maximise tax efficiency.
At that point, a business owners will take money out in the form of salary and dividends. A business owner making over £30k gross profit will reduce the amount of National Insurance they are paying, thereby saving on both tax and NI.
However, the decision to incorporate is about more than just tax, and in fact a lot of the tax benefit has reduced recently.
Limited liability is also a major factor. As a business grows there is less risk with limited liability. So much depends on your circumstances so do get in touch with one of our AIMS accountants for professional advice.
You can find your nearest AIMS accountant here.
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