Self-Employment or a Limited Company?

  • Maintains individuality working, accepting the risks and drawing benefits.
  • May or not have starting capital such as cash, tools and equipment.
  • Profits may be added to capital and drawings deducted, although private and business matters must be kept separate.
  • No legal obligation to open a business bank account.
  • HMRC inspects accounts occasionally and investigates if tax is underpaid.
  • Unlimited responsibility for the business debts; a self-employed may have to sell his personal belongings.
  • Legal obligation to complete and file Self Assessment Tax Return SA 100.
  • HMRC calculates NI and tax liability after deduction of Personal Allowance 12,570-2023/24; tax applies:20% for income to £37,700, 40% for income between £37,701 and 125,140, and 45% when above £125,140.
  • Profits are calculated after deducting tax-allowable business expenses from income and payment of liabilities and tax
  • Individuality is lost, as a limited company is a separate entity.
  • Starting capital is in shares; may or may not have tools and equipment.
  • Capital must be kept separate from profits and not be withdrawn except under exceptional circumstances under the Company Act 1985.
  • Must open a business bank account as limited company is a separate legal entity.
  • Accounts must be annually audited if company is not exempt (dormant)
  • Responsible for the debts solely to the number of unpaid shares they initially agreed to be liable.
  • Legal obligation to complete and file Corporation Tax Return – CT 600.
  • HMRC does not calculate Corporation Tax liability. The main rate is 25% on profits above £250,000, small profits rate – 19% on income to £50,000, and marginal rate of 26.5% on income above £250,000.
  • Profits in the form of dividends are paid to the shareholders after deduction of tax-allowable business expenses and liabilities and payment of Corporation Tax.

Capital Gains Tax allowance

Private expense deducted for tax


Aquisition of Shares



Capital Gains Tax

Form P11D

Self-Assessment Form P11D

Corporation Tax


Annual Accounts, Corporation Tax, Confirmation Statement Form P11D – directors & employees