What are the benefits of establishing a Limited Company?

What are the benefits of establishing a Limited Company?

The main benefit of setting up a limited company, as mentioned above, is that your personal liability as a company director is limited. Your assets are distinct from the company's assets, so not only are you protected should your company go under, but you also enjoy a tax advantage compared to working as a sole trader.

As a shareholder in your own company, you can draw most of your income from the company in the form of dividends. Unlike salary payments, these are not subject to National Insurance Contributions (NIC). They are taxable, but the first £2,000 is tax-free. Although this is a significant reduction from the £5,000 dividend allowance that shareholders enjoyed prior to 6 April 2018, it is still not to be sniffed at.

You can also divide your shares with a spouse and time your dividend declarations (payments) in order to maximise both your tax-free allowances. Different classes of shares can also be created for tax planning purposes – for instance, if other business partners or investors become involved further down the line.

As a company director, you have total control over your own business, unlike if you were working via an umbrella company. Being a company director also gives you a certain professional status, which can be useful in acquiring contracts, entering into negotiations and exploring future business opportunities.

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