Is it worth setting up an LTD Co. for a bit of 'side work' ?

[trumpet]

I'm currently with an umbrella company, but I'm thinking of taking on a new 1 year contract on PAYE as a full-time employee.

From time to time I get freelance work. This is short-term work, putting small websites together mostly. I get half a dozen or so a year. I am also thinking of buying a server and charging these website clients monthly for server space and general maintenance.

I'm thinking of running my expenses through the company - for example the server, computer, broadband bill, rent etc.

- Would it be worth the hassle to set up an LTD for this type of work?
- Roughly how much would an LTD like this cost to run?
- Would the running costs vs the savings on expenses be worth it?

Thanks in advance for your help.

[northernladuk]

It isn't normally worth starting a LTD below £30k I believe...... Can't you just do it as a sole trader?

[Maslins]

Ball park figure what annual profit would you expect it to make?

Sweeping generalisation, but alongside a PAYE job:
If <£10k I'd suggest sole trader.
If >£20k I'd suggest Ltd Co.
If £10-20k, take your pick.

[dmini]

Remember if you do a server, you also need to have SLAs, offsite regular backups, good inbound broadband, firewalls, etc..... Otherwise, you are really really vulnerable.
You would probably also need a business grade broadband, as some ISPs get a little upset, if you run lots of business on a personal broadband service.

[Andrew@Wisteria]

It isn't normally worth starting a LTD below £30k I believe...... Can't you just do it as a sole trader?

I would go as far as saying unless its £35 - 40k annually then the extra administration and hassle doesn't outweigh the tax savings (less accountancy fees!) I doubt 6 or so websites adds up to this - unless you are doing very high end stuff!

A quick calc I did showed that a £30k profit company only saves £1,793 in tax/NI compared to Self employed.

[Maslins]

For someone doing their own thing full time then I'd agree with ~£30k as the tipping point (or possibly slightly lower IMHO).

However, separate full time job has two significant impacts:
1) individual will almost certainly have used up their personal allowance, and quite often the basic rate band too. Therefore if the individual's in no rush to get the tax from the Ltd Co (they can live off their salary) it's often 40% personal tax vs 20% corporation tax. That's a big difference, and is in additional to the normal NIC savings when compared to sole trader.
2) admin for a sideline Ltd Co isn't too bad. It won't have to bother with employer registration and the faff and potentially cost of RTI, and it can probably ignore VAT too.

Just thought I'd explain a little further why I've given a lower threshold than other posters.

[Sameera at Best Tax]

Even if you have a full time PAYE job and do a bit of freelancing (and lets say you are doing it as self-employed/sole trader) then you will need to submit (highly recommended) a self assessment tax return. The cost of which will be slightly lower than running a LTD company. You will also have to pay additional class 2 NI and income tax on profits.

If in your situation i would personally go for a LTD company as the added benefits will be greater than the added cost. A good accountant should be able to do take care of everything for you.