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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I am currently in full employment but establishing a small

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Hi I am currently in full employment but establishing a small manufacturing/retail business independent of my employment. I was looking to register the company as a limited business, however was wondering if I would be best served to start the business as a sole trader and would profits/losses in line with the business then be treated through my personal tax return?
At this stage the business is in effect running up expenses through use of third party designers, sample makers etc so would not likely move to revenue generation for 12 months or so.

Most people who start a new business do so on a sole trader basis as opposed to through a limited company, not least because it may not work out and its easy to close it down. A limited company comes with more compliance burdens than a personal tax return. At higher profit levels, the tax and national insurance savings to be had by using a company can be significant and there is more flexibility on how much tax you pay personally through planning efficient salary and dividend drawing levels.

If you are unlikely to see a profit for a year or two, you would probably be best off starting out as a sole trader so that you can offset trading losses against other personal income sources which you cannot do with company losses. Take a look here for information on trading losses and how they can be used. Company losses can be caried back against previous profits or carried forward to be offset against future profits only.

I hope this helps but let me know if you have any further questions.
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