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Sparrow Creative Freelance Graphic and W

Hello, my name is Peter, i'm a founder and freelance graphic designer at Sparrow Creative™ studio based in Ipswich, Suffolk.

I have been a freelance graphic designer and Brand identity expert for over 10 years, with

BA - Graphic & Brand Design, also a multiply certifications gained from Adobe, Google and London School of Design & Marketing.

The outcome reached is a unique point of difference to your brand, combining creative flair and expertise with marketing, advertising and branding awareness. The result is engaging, thought-provoking and effective design with a unique twist, providing an original solution for your brand or product.

© 2019 Sparrow Creative Studio. Web and Logo design in Ipswich, UK. 

Sparrow Creative Studio Ipswich

Registered Address: 

Handford Rd. Ipswich, Suffolk, IP1 2BF

01473 561 055

0783 533 2629

info@sparrow-creative.co.uk

If you’ve got an exciting new project and need my help,
submit your brief here and I’ll be in touch shortly to give you a quotation.
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Sole trader or full on limited company?


Choosing whether to set up as a sole trader or a limited company is a key decision for a new business, as two of the most common legal structures, there are some important differences that you’ll need to consider. Which option you choose will have an impact on your admin and tax responsibilities amongst plenty of other things.


Sole trader vs limited company: What’s the financial risk?

Most people these days who set up their own business register as a sole trader (i.e. become self-employed). The other popular option is to “incorporate” a business, which means registering a private limited company with Companies House in England and Wales.


Personal risk is the key factor here, so If you register as a sole trader, in law, there’s no distinction between you and the business. This makes you personally liable for business debts, which can place your personal assets – possibly including your home – at risk if the business fails.


In law, the limited company is a separate entity, so providing you don’t trade recklessly or fraudulently, and don’t give personal guarantees for loans, your risk of loss is restricted to shares you own in the company and any personal cash you invest.


Sole trader or limited company? Tax and NI payments

Sole traders (i.e. self-employed people) pay income tax on their business profits. There is a Personal Allowance of £25,500 a year (2019/20 tax year for all figures quoted), upon which you don’t pay Income Tax.


Thereafter, the rates are:

20% on £0-£37,500 income (basic rate)

40% on £37,501-£150,000 (higher rate)

45% on £150,000-plus income (additional rate).

If you’re self-employed and earn profits of £6,365 or more a year, you must also pay Class 2 National Insurance contributions (NICs) of £3 a week.


And if your annual profits are £8,632 or more, additionally, you’ll pay Class 4 NICs of:

9% on profits £8,632-£50,000

2% on profits over £50,000.

Class 2 and Class 4 NICs are paid through Self-Assessment.


Each year, limited companies must submit a Corporation Tax Return and later pay any Corporation Tax they owe (19% of profits less allowances and reliefs).

Company directors are classed as employees and (via PAYE) pay NICs on their salary and bonuses over £8,632. The company also pays NICs on director earnings.


Company directors usually also receive dividend payments. You don’t pay tax on the first £2,000 of dividends you receive within that tax year, but amounts over this are subject to Income Tax. The amount will depend on which band you’re in, but you’ll pay:

7.5% on earnings up to £37,500 (basic rate)

32.5% on earnings £37,501-£150,000 (higher rate)

38.1% on earnings above £150,000 (additional rate)


Sole trader vs limited company: What’s more tax-efficient?

If you set up a private limited company, combining a minimum basic wage (so you enjoy the benefits of paying National Insurance) with dividend payments may be a more tax-efficient way to earn income.

But do not take it for granted that being a director of a limited company is the most tax-efficient option. Not too long ago, company directors could receive £10,000 in tax-free dividends. However, the dividend allowance was reduced to £5,000 and more recently it has fallen to just £2,000 a year.


All things fully costed, setting up a private limited company might not be the most tax-efficient option, being a sole trader might work out cheaper and simpler, although there are other considerations. Some believe that customers and suppliers perceive limited companies to be more professional, stable, better managed, etc., although others dispute such claims.


And while registering as a sole trader is quick and free, setting up a limited company can be achieved quickly for just £13 if you do it yourself online (it’s £40 if you do it by post). Registration costs are not much of a differentiation when choosing a legal structure, but monthly admin costs might be.


So to sum it all up, and provide a clear answer to the question of what’s better, well there is no clear answer, it all comes down to individuals needs, both of these have they own perks in one way or another, so it’s up to you to choose the right path, but do try and plan ahead your strategy and list all your business needs. There are different tools for different purpose, so choose wisely or if in doubt, chat with a professional accountant or business advisor, in most cases they’ll provide best tips a free of charge.