Self Employed vs Limited Company, Which is better for you?


This is the most popular way of running a business in the UK and maybe the best option if you want to get your company up and running quickly with minimal fuss. You can set the wheels in motion without worrying about filling annual accounts, paying corporation tax, or registering your business with companies house

Limited Company

Choosing to set up as a limited company is not as straightforward as registering as self-employed, and it does come with ongoing additional administrative responsibilities. The business needs to be registered with companies’ house, directors must be appointed and an annual tax return along with a set of accounts.

On the plus side, you could find yourself paying substantially less tax than you would as a sole trader. This is because you are able to take company profits as dividends instead of receiving this as income; dividends are taxed separately and are not subject to NICs. Due to this, limited companies tend to have more complex accounting responsibilities; however, you can employ an accountant to ensure you are fulfilling your tax and legal obligations.

What’s the difference?

The main difference between registering a limited company and self-employed is that a limited company is an entity in its own right. It is permanently based in the UK, it pays its own taxes and can protect the company shareholders and managers from liability self

Being self-employed –is it right for you?

There are pros and cons to being self-employed, and when you’re weighing up self-employment there are a number of things that you need to consider

  • Are you clear about how you’d get clients or customers?
  • Do your research and form a plan
  • Determine your comfort level with an unstable income
  • Be prepared to work
  • Have you thought through the impact of losing employee benefits, for example, holiday pay, sick pay, and employer pension contributions

Advantages of being self-employed

  • You control your own life
  • You can be creative
  • You choose your hours
  • You can deduct self-employment tax as a business expense
  • If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses

What are the main reasons people decide to work through a limited company?

Having a limited company comes with pros and cons you will have to consider such as

  • Limited companies must be incorporated at Companies House
  • You will be required to pay incorporation fee to companies house
  • Company names are subject to certain restrictions
  • You cannot set up a limited company if you are an undischarged bankrupt or a disqualified director
  • Personal and corporate information will be disclosed on public records
  • You may need an accountant help with your tax affairs

The advantages of having a limited company are

  • Minimizing personal liability
  • Professional status
  • Tax efficiency and planning
  • Higher personal remuneration
  • Credibility and trust
  • Splitting income