Are you currently Self Employed and thinking of setting up a Limited Company?
If so, then this post is for you. Changing your business from a sole trade to a limited company? Yes you will need to ‘deregister’ as self employed when you set up as a Limited Company. If you are setting up a limited company which is a different trade to your sole trade, you can continue to run them alongside each other. This article covers what you need to do if you need to deregister.
Here you can find out how: Firstly you will need to ‘sign-off’ from self-employment when you have stopped being self-employed. The best course is to write to HMRC (or use the on-line form) and say that you have stopped being self-employed, as soon as this happens. HMRC will not know that you have stopped being self-employed simply because you now work as an employee, or are claiming out of work benefits.
Other points to consider:
If you are registered for VAT, consider when to cancel your VAT registration
If you are working in the Construction Industry – notify HMRC on the Construction Industry helpline (0300 200 3210) that you are no-longer working in Construction
Complete a self-assessment tax return to cover your last period of trading. You will need to wait until the end of the tax year to do this.
Pay any outstanding tax.
Keep your business records, usually for 6 years.
Ensure that HMRC has your correct address for the 12 months following submission of your final tax return. Give HMRC a forwarding address if you move within 12 months.
Dangers of not notifying HMRC at once
If you fail to notify HMRC at once that you have stopped being self-employed, you could find that HMRC continues to send you self-assessment tax returns after you have stopped trading. If you ignore these returns you could be liable for penalties. In addition, HMRC may create an estimated tax bill if you do not complete and submit the tax returns on time. These estimated debts are legally due and can only be displaced by sending in a tax return within 3 years of the filing date for the return.
How to set up your own limited company
Although there are many steps to setting up your own limited company, the first step is one of the most important. Choosing a company name requires a lot of thought. You may have built up a reputation under a name you used whilst self-employed, so could use something similar or the same if it is available. You may opt to choose a name which is particularly relevant to your industry. If you have an idea of your company name, Companies House offer a useful tool to check if it is available. Once you have chosen a suitable company name, you can then form your limited company online.
Once you have set up your Limited Company, you will need to consider paying yourself. Moving money from your business account to your personal bank account, is a topic worth discussing with your accountant. Tax planning will allow you to use your profits in the most efficient manner and ensure that you are paying the appropriate rate of tax. Taking advantage of the benefits of trading as a limited company, you should plan your salary and any dividends you may wish to draw from the business. Your accountant will be able to advise you on the best way to manage your finances, to ensure that you are able to maximise your profits.
We understand that setting up your limited company is important; we can help you and have your company up and running in no time. Get in touch today to see how we can help.