Despite being one-man bands, there are a growing number of individuals taking advantage of tax planning to establish limited companies and increase their own cash availability.
Why Are Limited Companies Popular?
If an individual has a business or trade that revolves around a particular skill, they can work as a sole trader and pay tax through their self-assessment tax return. They will pay income tax and make National Insurance contributions.
Income earned through employment or self-employment is subject to National Insurance in addition to income tax. It may be possible for workers to save on National Insurance by being paid dividends instead of a salary; this is because dividends are not subject to National Insurance.