{"id":3101,"date":"2024-05-22T13:03:16","date_gmt":"2024-05-22T13:03:16","guid":{"rendered":"https:\/\/www.robbtax.co.uk\/blog\/?p=3101"},"modified":"2024-05-22T13:03:16","modified_gmt":"2024-05-22T13:03:16","slug":"is-incorporation-still-the-way-to-go-for-solid-financial-planning","status":"publish","type":"post","link":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/","title":{"rendered":"Is incorporation still the way to go for solid financial planning?"},"content":{"rendered":"<p>From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?<\/p>\n<p><!--more--><\/p>\n<p>Our experienced team have explored the various benefits and disadvantages to give you a clear view of the best option for you.<\/p>\n<p><strong>Liability <\/strong><\/p>\n<p>The central issue around whether to incorporate your business or not is the question of liability.<\/p>\n<p>A limited company is its own legal entity, separate from you or other directors. When you operate as a sole trader, in comparison, you are not legally separate from your business.<\/p>\n<p>Incorporation carries several filing and registration responsibilities which aren\u2019t required as a sole trader or owner of a partnership.<\/p>\n<p>However, incorporation also means that you aren\u2019t personally liable for business tax and debts, offering a significant amount of protection when it comes to borrowing and investment for growth.<\/p>\n<p><strong>Profit extraction<\/strong><\/p>\n<p>Extracting profits from a partnership or as a sole trader is straightforward. The company is not legally separate from you, therefore profits are classed as your income.<\/p>\n<p>With a limited company, profits must be legally extracted from the business to be accessed for your personal use, which can be done through:<\/p>\n<ul>\n<li><strong>Salary<\/strong> \u2013 Paying each director a salary, sometimes at the value of their Personal Allowance for tax efficiency.<\/li>\n<li><strong>Dividends<\/strong> \u2013 A distribution of company profits to shareholders, taxed depending on your Income Tax band.<\/li>\n<li><strong>Director\u2019s loans <\/strong>\u2013 A way of borrowing money from your company without creating immediate personal tax liabilities.<\/li>\n<\/ul>\n<p>Planning profit extraction is essential to ensure that your personal finances are as efficient as possible.<\/p>\n<p><strong>Paying tax on profits<\/strong><\/p>\n<p>Tax is often a strong influence in the decision to incorporate your business or not.<\/p>\n<p>Limited companies may benefit from a lower overall tax liability, as they are subject to Corporation Tax on profits.<\/p>\n<p>This is charged at a rate of 19 per cent for profits below \u00a350,000 (small profits rate) and 25 per cent for profits above \u00a3250,000 (main rate).<\/p>\n<p>Profits in between these thresholds are subject to a gradually increasing rate of Corporation Tax from 19 to 25 per cent.<\/p>\n<p>In comparison, sole traders and business owners in a partnership must pay Income Tax on profits.<\/p>\n<p>Income Tax is charged at a basic rate of 20 per cent \u2013 rising to 40 per cent for yearly income over \u00a350,270 and 45 per cent for yearly income over \u00a3125,140.<\/p>\n<p>Additionally, the Personal Allowance is reduced by \u00a31 for every \u00a32 that you earn over \u00a3100,000, meaning you have no Personal Allowance if you earn over \u00a3125,140.<\/p>\n<p>This means that, as your business grows, incorporation could be the more tax-efficient choice.<\/p>\n<p><strong>Corporation Tax reliefs<\/strong><\/p>\n<p>As a sole trader or owner of a partnership, you can claim certain running costs, such as office costs, staff costs and travel expenses, as allowable expenses.<\/p>\n<p>These reduce your taxable profits and overall tax liability.<\/p>\n<p>However, as your business grows, you may be able to become more tax-efficient by incorporating and benefitting from Corporation Tax relief, including:<\/p>\n<ul>\n<li><strong>Capital allowances<\/strong> \u2013 Writing off plant and machinery costs against taxable profits<\/li>\n<li><strong>R&amp;D tax relief<\/strong> \u2013 Credit against qualifying spend on R&amp;D costs<\/li>\n<li><strong>Structures and buildings allowance<\/strong> \u2013 Writing off some construction costs for commercial buildings<\/li>\n<li><strong>Patent Box<\/strong> \u2013 Lower Corporation Tax rate of 10 per cent for earnings from patented inventions.<\/li>\n<\/ul>\n<p>These reliefs are only beneficial over allowable expenses if you make sufficient capital expenditure.<\/p>\n<p><strong>The drawbacks of incorporation<\/strong><\/p>\n<p>Each company structure has its challenges as well as its benefits.<\/p>\n<p>As a separate entity from its owners, a limited company carries filing requirements with Companies House and additional responsibilities for directors in the form of Director\u2019s Duties.<\/p>\n<p>March 2024 saw the introduction of higher Companies House fees for certain filing requirements, including filing a confirmation statement, incorporation and changing the name of your business.<\/p>\n<p>New regulations were also introduced, including:<\/p>\n<ul>\n<li>Explicitly confirming that the company exists for lawful purposes<\/li>\n<li>Greater powers for Companies House to query discrepancies<\/li>\n<li>Requirements for identity verification for UK business directors<\/li>\n<li>Requiring a registered email address when submitting a confirmation statement<\/li>\n<\/ul>\n<p>If you choose to incorporate, you must ensure that the company directors have the willingness and capacity to take on these tasks and meet filing deadlines on a regular basis.<\/p>\n<p>Additionally, the tax benefit of incorporation for directors may be decreasing as the dividend tax-free allowance falls.<\/p>\n<p>We can advise you on the right structure for your business and how to manage the challenges that accompany it, including how to navigate tax liabilities, filing responsibilities and profit extraction.<\/p>\n<p><strong>Contact a member of our team today to discuss how we can help you. <\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?<\/p>\n","protected":false},"author":1,"featured_media":3102,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,89,20,94,4,13,8,93],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Is incorporation still the way to go for solid financial planning? - Accountants in Sutton Coldfield<\/title>\n<meta name=\"description\" content=\"Robb &amp; Co is an independent firm of chartered accountants and specialist tax advisors based in Sutton Coldfield, West Midlands.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is incorporation still the way to go for solid financial planning?\" \/>\n<meta property=\"og:description\" content=\"From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/\" \/>\n<meta property=\"og:site_name\" content=\"Accountants in Sutton Coldfield\" \/>\n<meta property=\"article:published_time\" content=\"2024-05-22T13:03:16+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1707\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Robb &amp; Co Chartered Accountants in Sutton Coldfield\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Is incorporation still the way to go for solid financial planning?\" \/>\n<meta name=\"twitter:description\" content=\"From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Robb &amp; Co Chartered Accountants in Sutton Coldfield\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/\",\"url\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/\",\"name\":\"Is incorporation still the way to go for solid financial planning? - Accountants in Sutton Coldfield\",\"isPartOf\":{\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg\",\"datePublished\":\"2024-05-22T13:03:16+00:00\",\"dateModified\":\"2024-05-22T13:03:16+00:00\",\"author\":{\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/9617d9fd2f8b94d6c2d74ff7235ca72b\"},\"description\":\"Robb &amp; Co is an independent firm of chartered accountants and specialist tax advisors based in Sutton Coldfield, West Midlands.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage\",\"url\":\"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg\",\"contentUrl\":\"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg\",\"width\":2560,\"height\":1707},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.robbtax.co.uk\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Is incorporation still the way to go for solid financial planning?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/#website\",\"url\":\"https:\/\/www.robbtax.co.uk\/blog\/\",\"name\":\"Accountants in Sutton Coldfield\",\"description\":\"Accountants in Sutton Coldfield\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.robbtax.co.uk\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/9617d9fd2f8b94d6c2d74ff7235ca72b\",\"name\":\"Robb &amp; Co Chartered Accountants in Sutton Coldfield\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/64286301fda52d3e3898b597c466a37c?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/64286301fda52d3e3898b597c466a37c?s=96&d=mm&r=g\",\"caption\":\"Robb &amp; Co Chartered Accountants in Sutton Coldfield\"},\"url\":\"https:\/\/www.robbtax.co.uk\/blog\/author\/admin\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Is incorporation still the way to go for solid financial planning? - Accountants in Sutton Coldfield","description":"Robb &amp; Co is an independent firm of chartered accountants and specialist tax advisors based in Sutton Coldfield, West Midlands.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/","og_locale":"en_US","og_type":"article","og_title":"Is incorporation still the way to go for solid financial planning?","og_description":"From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?","og_url":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/","og_site_name":"Accountants in Sutton Coldfield","article_published_time":"2024-05-22T13:03:16+00:00","og_image":[{"width":2560,"height":1707,"url":"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg","type":"image\/jpeg"}],"author":"Robb &amp; Co Chartered Accountants in Sutton Coldfield","twitter_card":"summary_large_image","twitter_title":"Is incorporation still the way to go for solid financial planning?","twitter_description":"From a tax planning perspective, incorporation of a business into a limited company has long been considered the gold standard in business development and growth \u2013 but is this still the right move?","twitter_image":"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg","twitter_misc":{"Written by":"Robb &amp; Co Chartered Accountants in Sutton Coldfield","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/","url":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/","name":"Is incorporation still the way to go for solid financial planning? - Accountants in Sutton Coldfield","isPartOf":{"@id":"https:\/\/www.robbtax.co.uk\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage"},"image":{"@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage"},"thumbnailUrl":"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg","datePublished":"2024-05-22T13:03:16+00:00","dateModified":"2024-05-22T13:03:16+00:00","author":{"@id":"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/9617d9fd2f8b94d6c2d74ff7235ca72b"},"description":"Robb &amp; Co is an independent firm of chartered accountants and specialist tax advisors based in Sutton Coldfield, West Midlands.","breadcrumb":{"@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#primaryimage","url":"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg","contentUrl":"https:\/\/www.robbtax.co.uk\/blog\/wp-content\/uploads\/2024\/05\/Acc-A2-22.05.24-scaled.jpg","width":2560,"height":1707},{"@type":"BreadcrumbList","@id":"https:\/\/www.robbtax.co.uk\/blog\/is-incorporation-still-the-way-to-go-for-solid-financial-planning\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.robbtax.co.uk\/blog\/"},{"@type":"ListItem","position":2,"name":"Is incorporation still the way to go for solid financial planning?"}]},{"@type":"WebSite","@id":"https:\/\/www.robbtax.co.uk\/blog\/#website","url":"https:\/\/www.robbtax.co.uk\/blog\/","name":"Accountants in Sutton Coldfield","description":"Accountants in Sutton Coldfield","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.robbtax.co.uk\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/9617d9fd2f8b94d6c2d74ff7235ca72b","name":"Robb &amp; Co Chartered Accountants in Sutton Coldfield","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.robbtax.co.uk\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/64286301fda52d3e3898b597c466a37c?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/64286301fda52d3e3898b597c466a37c?s=96&d=mm&r=g","caption":"Robb &amp; Co Chartered Accountants in Sutton Coldfield"},"url":"https:\/\/www.robbtax.co.uk\/blog\/author\/admin\/"}]}},"_links":{"self":[{"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3101"}],"collection":[{"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=3101"}],"version-history":[{"count":1,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3101\/revisions"}],"predecessor-version":[{"id":3103,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3101\/revisions\/3103"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/media\/3102"}],"wp:attachment":[{"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=3101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=3101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.robbtax.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=3101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}