I went through this with 2 accountants I know, and after 6 years of trading still classed as Self Employed with 2 freelancers employed.
Pros of LTD
- You can pay yourself via Dividend (Don't pay tax or national Insurance on this as a person but the Company(ltd) pays tax on the money. This means it could effect your contribution for benefits and for pension at later date.
- If you do go under any debts you owe will not come back to you (In our field of design really has little benefit) - Mentioned above
Cons of LTD
- Payment of salary has to be more fixed, you can not just removed money to pay self as and when you feel like it from the Company Bank Account.
- More cost of accountancy & books.
- People can easily get hold of your figures and see your salary.
- Need another Director on Board.
Pros of Self
- Salary is private
- Dont need a separate bank account although VERY advisable to keep accounts clear of money in & out for accounts at end of year.
- Can withdraw money for salary as and when you please.
- Found that through Recession, Companies are more willing to hire a Freelancer as then they know, if paying your costs your overheads are primarily low and aslong as that company is paying salary there is no real reason to go bust compared with Ltd companies that can just almost cease trading and disappear.
- Easy tax forms to fill out, Simple as look at costs to the "company(self employed)" fill this into a box, put how much money was brought in, this give you the turnover & profit, this gets sent to the tax office. They then calculate how much tax you owe, send you a bill and you then pay this at end of each year.
Cons
-If you go under and have debts, outstanding invoices then you will still be liable to pay these.
Personally I'm going to stick as self employed for foreseeable future, to many tax benefits for me personally. Will however be going VAT Registered as all my clients are VAT registered and then means can claim VAT back, especially as its going up to 20% in Jan.
If you have any other questions feel free to ask!