Starting own business – UK

Starting your own business is an exciting venture! Here are some points to consider when deciding between setting up a limited company (Ltd) or registering as self-employed:

Limited Company (Ltd)

Pros:
1. Limited Liability: Your personal assets are protected if the business incurs debt.
2. Tax Efficiency: Corporation tax rates can be lower than personal income tax rates, and you can take dividends, which may be more tax-efficient.
3. Credibility: Having a company can enhance your professionalism and credibility with clients.
4. Easier to raise capital: It can be easier to attract investors or secure funding.

Cons:
1. Complexity: More paperwork, legal requirements (like filing annual accounts), and possibly more expensive to run.
2. Initial Costs: You will need to register the company, which involves some costs.
3. Dividends and PAYE: You will need to manage your salary and dividends, which can be more complex than self-employed taxation.

Self-Employed

Pros:
1. Simplicity: Easier setup and fewer ongoing obligations; you’ll complete a self-assessment tax return instead of annual accounts.
2. Less Overhead: Generally lower costs to set up and operate, which may suit your situation while still working full-time.
3. Direct control: You have full control over your profits and how you manage your finances.

Cons:
1. Liability: You are personally liable for any debts incurred by the business.
2. Higher Tax Rates: You’ll likely pay more in taxes as profits rise since personal income tax rates can be higher than corporation tax.
3. Perception: Some clients may view self-employed individuals as less professional than a limited company.

Recommendations:

1. Start Small: Since you plan to start slow while working in-house, consider beginning as self-employed. This allows you to test your business idea with lower overhead.
2. Consult an Accountant: Regardless of your choice, it’s wise to discuss your specific circumstances with an accountant. They can help you understand your obligations and tax implications.
3. Plan for Growth: If your business takes off and you find steady income, it may be worth transitioning to a limited company for the benefits mentioned above.

I hope this helps you make an informed decision! Best of luck on your business journey!