Starting up as Sole Trader whilst in Full Time Employment

[nburgess]

Hi,

Forgive me if this has been asked a hundred times, but as my thread title might suggest, I'm thinking of setting up a company so I can bring in some extra income.
I work as CAD Techinican & would like to get in the odd bit of extra work (if I can of course) doing CAD work.
I spoke to one colleague of mine who works here as a contractor & he said he may be able to give me some work if I set up my own company. Having looked into it, it would seem (but correct me if I'm wrong) that the Sole Trader route is the better option for me.

The question is, what kind of tax would I be paying?
Would I contine to pay same rate of tax until I reach the income tax threshold (34k ish ?) or do I pay a completely different rate of tax on all earnings made through the company ?
Also, how much does it cost to set up & maintain a company ?

I would be most appreciative of any help people can give.

Many thanks.

Neil

[BA to the Stars]

Sole trader is you on your own so all income is yours and taxed as such. If you go over the £34k'ish threshold you mention then you will become a higher rate tax payer.

A Limited Company is a total seperate legal entity. Any PROFIT is taxed (currently at 21%). If you draw income from the company, you can do this either as a salary (on which you pay tax & NI) or dividends (no NI to pay & if you remain within the basic rate tax bracket, no additional tax to pay). Most of us that run a company use a combination of salary & dividend, however your circumstances if this is part time may mean that you may wish to use dividend only.

Have a look at the guides (go to the home page and click on the first timer link on the left hand side of the page).

You will also probably be advised to speak to an accountant.

[backlight]

Just curious if anyone has a ltd company and is their own account as well. For the first year of my business I used the services of one of the company formation / accountant organisations that advertise on Contractor UK (which I find costly for the service they provide) but this year I am thinking I should be able to do it myself.

Comments / Suggestions - Thanks!

[NotAllThere]

Back before IR35, I used to do all my own accounts - it isn't difficult. With the current hostility of the government to contractors, I would advise now to find a good recommended local accountant.

NotAllThere