One reason that people trade through a limited company is that it's tax efficient.
If you're a basic rate tax payer (i.e. earn less than £41,450 a year), then you can trade through a limited company and pay no Income Tax or National Insurance (although your company would still pay Corporation Tax).
Company office holders like directors and the Company Secretary are covered by the National Minimum Wage Act, so they can structure their salaries and dividends in order to minimise their personal tax liabilities.
They can also get the benefits of National Insurance without actually paying any if they get their salary right!
Check out our blog to see what the optimum salary dividend split is in 2013/2014.
ICAEW Chartered Accountants based in Bideford, North Devon. Working together with business owners to improve their business and their world.
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