The Tax Benefits Of Running A Limited Company

benefits of a limited company

If you are running a business in the UK, you must know the most popular structure for any kind of business is a limited company. The benefits of a limited company can not be denied and the reason this structure is the most popular is due to the factor of financial and professional benefits it has to offer to the owners. The benefits are way more than what a sole trading structure has to offer. Even the contractors that are working through the umbrella companies are not offered as much as a limited company has in the store of benefits.

Moreover, if you are looking for reasons that can help you decide on the type of structure for your business as a beginner, our guide will help you to be able to take an informed and conscious decision. The tax and other benefits of a limited company will be overviewed here. You will have to be aware of the professional downside as well to make the right decision.

 

Are you looking for help in knowing more about the benefits of a limited company? You can seek the assistance of professional tax advisors at the AccountingFirms

 

What are the Tax Benefits of a Limited Company?

The prominent reasons to get the most benefits out of a business structure are the factors like professional status, tax efficiency, and limited liability. All of this is offered when you tend to opt for the limited company. Other than the discussed benefits, there is a lot more to the list of advantages when it comes to the limited company. The reasonable ones are listed and discussed below for an explanation. This will help you to take a conscious and informed decision.

 

1- The limited Company is a Separate Legal Entity

one of the prominent reasons for the benefits is that a limited company functions as a separate legal entity and this makes the liabilities limited as well. The entity is independent as it is legally separate from the presence of the directors and the owners. This is because limited companies tend to decide on a contract with their identity. The debts and liabilities of the tax that come in the way are solely the responsibility of the company itself. This makes the liabilities of the directors and the owners limited as the full extent of the company’s liabilities do not rely on them.

 

2- Personal Remuneration

When it comes to the tax and related liabilities, the decision of setting up a limited company will give you the benefit of reducing the payments that you have to make for the national insurance and income tax. This is because you are given a combination of the salary and the dividends.

Moreover, if your income as a director is under the primary threshold, you will not have to pay any amount in form of national insurance class one and income tax. You are saved from the payments of corporation tax liability for your income because wages are considered the tax-deductible expense of the business.

 

3- Advantages of the Tax Efficiency and Relevant Planning

The current corporation tax percentage is 19% for the limited companies in the UK tax year 2022-23. However, in the case of a sole trader this limit of income tax is between 20-45% of the profits. This brings in the factor of fine flexibility while you are planning for saving on tax payments and reduce your tax bills for a limited company.

Some ways can help you understand what makes you fall in the higher tax bracket and how can you move your income in such a flexible way that does not affect your profits but you will ensure to be in the lower tax brackets. You better get an understanding of the dealing with reinvesting surplus cash and deferring personal income to make this possible for your tax payments.

 

4- The professional image and status

When you choose to trade via the structure of a limited company, it immediately affects your image and status in the industry positively. Your status and professional image are boosted by carrying out a business as a limited company. This does not mean that you will have to change the internal structure of your business. In the internal management of the business, the structure of ownership can be just the same as it was at the time of being the sole trader.

 

5- Minimisation of the personal liabilities

The simple yet most popular benefit that you will enjoy after trading through a limited company is limited liability protection. In simple words, you can say that when your business is going through a troubling phase and struggles with debts and other such liabilities, your assets will remain secure.

Because a limited company is treated as a separate identity and that too legally, the assets are known to be legally separate from the assets of the owner in such a case. The company is known to be a legal person that has its own identity as a business entity.

 

The Bottom Line

Now that you have gathered a fair amount of information about the benefits of a limited company, we can bring the discussion towards wrapping up. We can say that along with the tax benefits in several ways, the limited company brings in other beneficial factors that immediately boost the professional image and status of the owner in the industry. Not only the benefits, trading through a limited company offers you limited liabilities in comparison to any other business structure which keeps you and your assets protected in the struggling phase of the business. We hope these few minutes of reading will help you to consciously realise the tax benefits of a limited company and make the right business choice.

 

AccountingFirms is a place to match professional accountants and organisations in the UK. All the firms can find bespoke accounting services in under two minutes.

 

Disclaimer: All the information provided in this article on the benefits of a limited company, including all the text and graphics, in general. It does not disregard any professional advice.

Looking for a Qualified Accountant? Compare Accountants Now.

Accountants? Looking to Grow? List Your Firm Now?

Looking for a Qualified Accountant? Compare Accountants Now.

Accountants? Looking to Grow? List Your Firm Now?

Looking for a Qualified Accountant? Compare Accountants Now.

Accountants? Looking to Grow? List Your Firm Now?