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Budget and tax information from Exeter Accountant

Making the most of your profits

Recent changes to the budget mean that more people than ever are falling foul of higher tax rates, especially self-employed people.

Now you may run your own business but never thought it was worth the cost and hassle of setting up a limited company. But the truth is, can you afford not to.

The benefits of becoming a limited company far outweight the costs, in fact the costs can be recouped in a single year from the cuts in tax that you will benefit from.

View article on Sole Trader versus Limited Company

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Below is a quick reference summary of the prime aspects to the Budget. For details of how it the tax changes affect you and your business contact me on 01395 233178 or email us.

Learn how sole traders are lowering their tax bill


  • Saving tax and improving cash flow
  • Sole trader v limited company
  • Sole traders should enjoy limited company
  • Unlimited benefits by being a limited company
  • Learn how 250,000 sole traders lowered their tax bill         

Have you ever thought of the taxman as a friend?   Like most small businesses or sole traders you consider your tax payments are too high.  The possibility is that they are.  In the last year over 250,000 sole traders have reduced their tax bill and received a healthy boost to cash flow.  Surely, this would benefit your business as well.

As a sole trader, if you make an extra £1,000 profit, the tax is going to be £420.  If you were a limited company the tax would be £210.  This is one good reason to talk to to us about the process and benefits of becoming a limited company. 

Look at some of the other advantages-

  • The tax saving on £20,000 is £2,000 or 10%
  • As a limited company you have a much longer period to pay the tax.
  • Business cash flow improves
  • As you increase sales and profits the tax payable is lower
  • No self-employed stamp to pay
  • Relaxed late payment rules with lower penalties.

Just think – the above £20,000 might be your earnings as a sole trader.  You are going to pay £3920 in tax and within a few months.  As a limited company, the tax will be £3,000, but payable 9 months after the company’s financial year ends.  This could be 21 months.  Factor this in to the cash flow and it will make a significant difference.

The higher the tax band you enjoy, the bigger the benefits.  The 50p tax band just introduced, means that for every £1,000 additional profit you make, the Government intends to take £760.  Are you happy to pay the Government over 3 times the amount that you earn from your hard-won extra profit?  Limited company status reverses the position –you take the major share and the taxman the minor amount.

Changing from sole trader to limited company is stressless, as we do the work for you.  The fees, likely to be around £250-300 to form the company and get it running are more than covered by the tax saving in year 1.  Items such as Working Tax Credits are all maximised.  A wife, perhaps previously excluded from the expenses but now included, creates added tax benefits.  The change over to a limited company extends that tax payment time by carrying over the sole trader tax due.

“There are so many benefits for sole traders”.  “The time for you to talk to me is now.  Tax payments affect every business and every person.  You need to make sure that you are tax efficient and that means changing your status from sole trader or partnership to a limited company”.  

After the election, whoever wins, there are going to be tax increases.  The possibility is they will be personal rather corporate.  Another good reason to change your status and give your business time to sort out these increases and avoid the pitfalls.

Contact Steve today on telephone 01395 233178

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