The Ultimate Tax Guide for Content Creators

Hi there, Twirl Creators! 🎉

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I’m Rubie, and I specialise in UK accounting and tax for creatives. After spending most of my career working for traditional accountancy firms, I realised the industry needed a change. That’s when Mystyle Finance was born! 🌟

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As the founder of an accountancy firm for modern-day businesses, I’m super passionate about giving entrepreneurs the tools and knowledge they need to thrive. To me, being an accountant isn’t just about crunching numbers; it’s about empowering business owners, fostering confidence, and creating a solid financial foundation for their businesses. 💪

Now that we’re acquainted, let’s dig in… 🕵️‍♀️

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Today, we’ll be exploring the two most common types of business structures—sole trader and limited company—to help you choose the one that best aligns with your business goals and personal preferences.

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Sole Trader

What is a sole trader? A sole trader operates their business as an individual, with no legal separation between the business and the owner. Essentially, the business and the owner are one and the same. All aspects of the business, including profits, assets, and liabilities, belong solely to the owner. As a sole trader, you keep all the profits and are personally responsible for paying taxes on them. 💼

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Best for: Side hustlers, new business owners, those with lower profits. 🌱

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Let’s talk pros…

• Easy to set up: It couldn’t be easier to set up a sole trade business. Just choose a business name (if you want one) and register as self-employed with HMRC—voila, all done! 🚀
• Fewer admin costs and responsibilities: Registering as a sole trader won’t cost you a penny. There’s much less accounting work involved—just submit a self-assessment tax return to HMRC each year. This means lower accountancy fees, too. 💰
• More privacy: No legal requirement to publish annual accounts, meaning all information about your earnings and business performance is private. 🕶️

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Now, what about the drawbacks?

• Higher risk: Sole traders are personally liable for everything to do with the business. If the business runs into financial difficulty, your personal assets could be on the line. 🚨
• Not always tax efficient: As profits increase, being a sole trader can become tax inefficient. Sole traders face higher tax rates compared to limited company owners who can extract earnings as dividends. 📉

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Limited Company

What is a limited company? A limited company is legally distinct from its owners. They are privately owned (i.e., their shares are not available for the public to buy) and there can be one or more owners (referred to as 'shareholders'). 🏢

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Best for: People with personal assets, those trying to build credibility, businesses with higher profits. 🏆

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The Pros:

• Less risk: Limited company owners enjoy limited liability, meaning personal assets are protected if the business gets into trouble. 🔒
• Lower tax rates: Limited companies are taxed at rates between 19-25%, a saving compared to sole trader tax rates, which range from 20-45%. 📊
• Increased personal remuneration: Limited company owners extract money from the business in the form of dividends, which are taxed at lower rates and have no national insurance owed. 💸

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How about the cons?

• Less privacy: Limited companies must submit annual accounts to Companies House, making these documents publicly available. 👀
• More work involved: There are more statutory filings involved in running a limited company, from accounts to corporation and personal tax returns. Hiring a good accountant can mitigate this extra admin. 📝
• Higher accountancy costs: Due to the extra work, accountancy fees are higher. However, the benefit of hiring an accountant often outweighs the cost, as their expertise can save you more money. 💡

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So... what will it be?

You’ll definitely be grateful for setting up a limited company if your business faces financial difficulty. This structure can also be more tax efficient as explored above, and may look more reputable to potential clients.

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However, you must compare the benefits to the additional costs you will incur in hiring an accountant or, if you plan on doing the work yourself, the time lost and potential for getting things wrong (psst - HMRC can be quite unforgiving when it comes to mistakes!)

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If you’re still unsure, we can help you decide with a no-obligation quote and a set of calculations based on your circumstances to compare the tax savings between the two structures. 📊

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Find us here: https://www.mystylefinance.com/

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For our sole trader clients, we charge a fixed fee of £200, which includes preparation and submission of your tax return, as well as unlimited support throughout the year. 😊

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Let’s make your business dreams a reality! 🌟