Accounts FAQs

Please click on a question to view the advice.

Q: Should I be a sole trader (or partnership) or a limited company?
Q: Do I need to file a self assessment Tax Return?
Q: Is rental income from a second property I own taxable?

Q: Should I be a sole trader (or partnership) or a limited company?

Answer:
There are many factors to consider when making this decision.

From a tax and national insurance saving point of view it is quite a complex calculation, but as a rough rule of thumb if your individual profits are in excess of £20,000 then there are significant savings to be had by going limited.

There is more regulation involved with running a limited company – leading to extra costs – and this should be taken into consideration when looking into the tax and national insurance savings that can be achieved.

You do get the protection of limited liability, although it is possible for company directors to be pursued personally through the courts in some circumstances, but in practice you are less exposed to losing your personal wealth than a sole trader (or partnership).

Some people also feel that a limited company carries more kudos.

back to top

Q: Do I need to file a self assessment Tax Return?

Answer:
Yes, if you are self employed or a company director.

You also need to file one if you have an untaxed source of income e.g. rent from a second property, and if you are a higher rate payer receiving company benefits e.g. company car and/or investment income.

back to top

Q: Is rental income from a second property I own taxable?

Answer:
Yes, however there are a number of deductions available to reduce the taxable rental profit. If the property is mortgaged you can deduct the mortgage interest paid during the relevant tax year.

You can also deduct 10% of the rent received to allow for wear and tear. Additionally deductions can be made for repairs (not capital enhancements or improvements), insurance, cleaning, agent’s fees, property management fees, travel to and from the property etc.

So, if the property is substantially mortgaged the rental profit and tax bill can be fairly small.

back to top