A recent conversation on social media inspired me to write about what self-employed business owners need to consider when incorporating.
In the “Sole trader - is it more tax efficient to incorporate” blog, available here, I mentioned how at a level of £30,000 profit, “you could save £613 by incorporating. However, you will also incur additional costs for running a limited company and your accountancy fees will increase due to additional reporting requirements.”
So is it worth while paying an accountant?
Well, let's look at the savings. To recap, what was the tax saving through incorporation for a gross profit of £60,000?
While you are self-employed, accounting fees are not tax deductible if they relate to the production of you HMRC Self-Assessment. You can claim expenses for your businesses accountancy fees, providing the accountant’s time is being spent working on your sole trader accounts and not on personal items, such as the production of your HMRC Self-Assessment.
What is the tax saving through incorporation and paying an accountant?
What this means is that paying an additional £180/month for accountancy fees while incorporating can save you an additional £979 (£4,002-£3,023).
But there are other benefits by paying for an accountant such as:
· Claiming for additional eligible business expenses which you might be entitled to but you are not aware off.
· More accurate returns and paying the correct amount of tax
· And more importantly, not spending time on bookkeeping and filling returns, but doing things you love
Want to talk more about it? Drop us an email at email@example.com to discuss it further.