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Accountant@Work
[email protected], Accountant
Category: Tax
Satisfied Customers: 769
Experience:  Executive Director at [email protected]
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I work full time PAYE for the NHS. I also consult for two

Customer Question

Hi, I work full time PAYE for the NHS. I also consult for two other organisations who pay me from their bases in the USA. Is it more efficient for me to do a self assessment as a sole trader or set up a ltd company
JA: Have you talked to a tax professional about this?
Customer: no
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: no
Submitted: 9 days ago.
Category: Tax
Expert:  [email protected] replied 9 days ago.

Hi, welcome to JustAnswer. I'm [email protected], a UK-Qualified Chartered Certified Accountant with over 15 years of experience. I'll be answering your question today.

Customer: replied 9 days ago.
thanks
Expert:  [email protected] replied 9 days ago.

From a UK tax point of view, a Ltd company is more tax efficient. However, it depends on the nature of engagement with the US clients.

Are they willing to engage an individual or a corporate body for business transactions. If there are no issues with the IRS and corporate taxation in the US, then as far as UK taxation is concerned, Ltd company is far more tax efficient than self employed

Expert:  [email protected] replied 9 days ago.

If the US client is required to deduct tax at source from the payments, then you would be better off as a self employed person because then you can avoid being taxed twice on the same income under the double taxation treaty.

Customer: replied 9 days ago.
As a Ltd company how would the tax I pay on those earnings be different? Approximately what sort of percentage of earnings am I looking at paying in tax
Expert:  [email protected] replied 9 days ago.

I'll explain to you.

On a Ltd company, you will pay corporation tax on profits @19%

On a self employed income, you will pay income tax on 20% or 40%. Given the fact you already have a job with the NHS, i am expecting you would end up paying a higher rate of tax either 40% or 45%

Furthermore, you will also pay class 2 at £3.15 per week
and class 4 nic 0.25% on profits above £11,908

Customer: replied 9 days ago.
if i understand correclty as a ltd company i would pay 19% plus class 2 and class 4 when i earn above £11,908.
Expert:  [email protected] replied 9 days ago.

No. You will only pay Class 2 and Class 4 if you operate as a self employed business and not as a ltd company.

Customer: replied 9 days ago.
ok great, thanks
Expert:  [email protected] replied 9 days ago.

Correction**

class 4 nic 10.25% on profits above £11,908

Expert:  [email protected] replied 9 days ago.

You're welcome. Happy to help.

Expert:  [email protected] replied 9 days ago.

Thank you for trusting JustAnswer with your question. I look forward to assisting you again soon. You may contact me by either adding me to your favorites list or by typing @Accountant_at_work in a new post.

Expert:  [email protected] replied 9 days ago.

One more point to mention:

You will be withdrawing profits from your ltd company after paying corporation tax. These will be termed as Dividends and added to your personal income.

The dividend tax is as follows

First £2,000 are tax free

Then upto basic rate 8.75%

Then higher rate 33.75%