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Why setting up Limited Company is important

Hundreds of freelancers, IT contractors and small businesses decide to form a limited company every day. There are many reasons a sole trader or small business may choose to incorporate, however the three main advantages of going Limited are -


As a non-limited sole trader you’ll incur income tax and national insurance tax on everything you earn in the year. As you earn more you will see a significant chunk of your take-home pay being paid as tax. By operating through a limited company you will pay corporation tax of 20% (assuming your profits are less than £300,000), and can pay yourself through a combination of low wage (to minimise your PAYE and NIC outgoings) and tax efficient dividends.


A limited company is a separate legal entity to any individual that runs or owns the business. Although the Directors have legal responsibilities the "Vale of Incorporation" does provide protection against the owner's own assets should the company default on loans or make a loss. A self employed person's assets, on the other hand, could be at risk in such a situation.

Client Appeal

Many clients – especially big corporates – will be more inclined to do business with limited companies. For them it means the payment is purely a business transaction and they avoid the complications of putting you directly on their own PAYE payroll. In fact many large companies refuse to do business with sole traders.

Further help with "Information pack"