The Big Question: Is It Time To Set Up A Limited Company?

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May 19, 2017

Making it as a self-employed professional is never a walk in the park. Along the way, you’ll probably have met a few hurdles, but they haven’t stopped you. Somehow, things have turned out rosy as a contractor or freelancer. You’ve been officially ‘making it’ for a while now…

Yet, dimly, you’ve heard the sincere benefits of what it’s like to operate under a company name. Going limited is a touch more complex, in terms of accounting, but that shouldn’t matter when a service like ours is here to help.

Wanting to set up a limited company? Here are the signs you’re ready for it.

There’s too much tax coming out of your pocket

The basic rate for a UK taxpayer (20%) applies to an annual income between £11,500 to £45,000. Many self-employed workers take a good amount of time to reach this level. Some, however, are just about to cross the upper benchmark after their first couple of years.

Once you go above £45k, the tax you pay is doubled. With limited company status, you can split those earnings with dividend payments i.e. granting one part of your income as a salary, and the other as a dividend payment, which benefits from a much lower taxation rate. Plus, all directors can benefit from a £5000 tax-free dividend allowance, making this a savvy way to reduce your tax bill.

Your reputation isn’t great enough

Yes, clients will value you for the work produced, yet how do they find you in the first place? Limited companies are, basically, a chance to become a genuine brand. The strength of your professional character will stand on its own feet, enshrined in respectability.

That means you’re able to craft a business – a distinct entity from yourself – as a character from the ground-up. The precious ‘ltd’ status will soothe the concerns of anyone over what you can deliver. Put simply, it’s a symbol of dedication, talent and forward-thinking: the sole trading label has been cast off because you’re serious about what you do.

Self-protection is a growing concern

Freelancers and contractors do not have the benefit of a protected title. Anyone with your same initials, or working identity, could adopt that persona (perhaps unknowingly) and steal business off the back of it.

So, if you’re making a juicy return and reaping the joys of a fast-running client stream, it’s only right to protect that hard-won earning model. Registering with Companies House ensures that no-one can steal your trading name. Also, financial accidents (God forbid) are quenched by limited liability, meaning that in the worst case scenario you wouldn’t be liable for company debts that you personally can’t afford.

Wait long enough, and the natural evolution of self-employment will take you to set up a limited company, providing you heed the signals when they’re due. Bright Ideas is a specialised accountancy team for people just like you. Email us at or call 0161 451 3925 to ask us about the leap forward.

set up a limited company


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