Tax Tip – Sole Traders Unlimited Liability

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Sole Traders have unlimited liability for any debts that their business incurs, but shareholders are only liable for company debts up to the amount of any share capital that they own. Having Limited Liability is one of the biggest advantages of choosing to run a business as a Limited (Ltd) Company instead of a partnership or as a sole trader.

When a business is based from home, or in another property owned by the Director personally, it’s possible to extract profits as rent paid for the use of that home office or other premises. Although this rent is taxable in the hands of the Director, there’s no National Insurance to pay, and the company can deduct the rent in computing taxable profits for Corporation Tax purposes.

Income from property can be a complex tax issue for individuals as well. A private investor landlord is taxed on the amount of letting income received, less any allowable expenses occurred on a fiscal year basis, as well as any capital gains which may have been made on the sale. A ‘Property Allowance’ is available to individual landlords, which when claiming, removes the liability to tax if the gross rental income is less than £1000.

Get help and advice from our experts to determine the best set up for your business, and how to save the most money in managing your rental spaces. Talk to us today, and let us help you.

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