Transfer of digital asset to own Ltd company

The tax implications of transferring a digital asset (website) to own Ltd company.

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Good afternoon,

I am looking for some guidance regarding selling a digital asset to my own Ltd company, and I hope someone will advise me on the best course of action.

Brief background

  • Both husband (me) and wife are self-employed
  • Launched a website 5 years ago from scratch
  • Current income and profit is around £1,000 per month (only £10 expenses)
  • Recently set up an Ltd and now wish to sell the website asset to our own Ltd company (70%/30% share ownership)
  • The website’s market value is 15-20k.

Questions

  1. I understand that selling this digital asset to my own Ltd company will incur Capital Gains Tax (CGT). Can we use the combined CGT allowance of £24,600 as a couple to sell the asset, or just £12,300 for one person for the tax year 2022/23?
  2. Am I correct in assuming that the website’s total market value (15-20k) will be considered for CGT because I set the website up from scratch (the value went from £0 five years ago to 15-20k today)?
  3. Our Ltd company has no money in the bank to pay the market value of the asset at the moment, can the amount be paid via Director’s Loans over a number of tax years (e.g. £5k per year)? Does that mean that tax is due at the end of each tax year if the debt is not paid?
  4. As the business only generates £12,000 a year, we can use the income from the business to pay in salaries and dividends without any tax due, we wish to avoid the Ltd company going into 15-20k debt due to this asset sale. Would this be possible?
  5. After paying any relevant CGT, can this asset be “gifted” to the company without the Ltd having to pay for it? We are the sole owners/shareholders of the Ltd company.
  6. We wish to sell the asset in the future. Should we use the lower market value (15k) or higher (20k) in the current asset transfer for any future tax benefits?
  7. Can/should Business Asset Disposal Relief be utilised to transfer the asset?
  8. Can Business Asset Disposal Relief be used to sell the business in the future, now that we are trading as an Ltd company?

I’m sorry for the many questions (!!), thank you and looking forward to your insights!

Cheers.

Replies (47)

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By williams lester accountants
09th Jan 2023 13:38

Have you spoken to your accountant about all of this, as it is a fairly extensive question to expect a free answer!

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Replying to williams lester accountants:
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By Careerladder85
09th Jan 2023 14:05

williams lester accountants wrote:

Have you spoken to your accountant about all of this, as it is a fairly extensive question to expect a free answer!


Thanks for your reply.

Yes, I have spoken to a couple of accountants but they do not wish to discuss these things in detail unless I purchase their services.

The cheapest quote was £1050 for a year of accounts of a small Ltd. company. As we are barely making £12,000 a year, we decided not to purchase a professional accountant's service until we hit the 20k. They also quoted me £115 for registering my Ltd. company, which we decided to do ourselves in 15 minutes with a YouTube video.

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Replying to Careerladder85:
By williams lester accountants
09th Jan 2023 14:20

Then, is there not a YouTube video to answer all the questions you have asked here?

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Replying to williams lester accountants:
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By Careerladder85
09th Jan 2023 14:27

williams lester accountants wrote:

Then, is there not a YouTube video to answer all the questions you have asked here?

No, otherwise I wouldn't have asked it here. There are plenty of good-hearted professionals (lawyers, solicitors, accountants, web developers, etc.) who have a passion for their jobs and share useful information for free on various community forums to benefit others. I have asked my question(s) in this spirit. If anyone can/wants to help, thank you. If someone can't/won't, no problem. No harm in asking!

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Replying to williams lester accountants:
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By Careerladder85
09th Jan 2023 14:28

williams lester accountants wrote:

Then, is there not a YouTube video to answer all the questions you have asked here?

No, otherwise I wouldn't have asked it here. There are plenty of good-hearted professionals (lawyers, solicitors, accountants, web developers, etc.) who have a passion for their jobs and share useful information for free on various community forums to benefit others. I have asked my question(s) in this spirit. If anyone can/wants to help, thank you. If someone can't/won't, no problem. No harm in asking!

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Replying to Careerladder85:
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By Postingcomments
09th Jan 2023 18:35

I love the way that these types take the questions literally and answer them, rather than taking them as the "get lost" message that they clearly are.

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Replying to Careerladder85:
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By Truthsayer
10th Jan 2023 08:44

Whatever service your business offers, do you provide it for free to people whose turnover is less than £20k? Also, regarding the phrase 'share useful information for free', that is what we are doing: we are not charging you a penny for the excellent advice that you should engage an accountant.

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By nrw2
09th Jan 2023 13:39

Why are you doing this? It may not be worthwhile, without understanding your circumstances.

If determined, you may need to navigate TiS legislation (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm36805) amongst other things, so the best time to appoint an accountant is now.

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By David Ex
09th Jan 2023 13:41

Careerladder85 wrote:

… I hope someone will advise me on the best course of action.

The best course of action is to engage an accountant. Good professional advice is money well spent.

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Replying to David Ex:
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By Careerladder85
09th Jan 2023 14:15

David Ex wrote:

Careerladder85 wrote:

… I hope someone will advise me on the best course of action.

The best course of action is to engage an accountant. Good professional advice is money well spent.

Hi, yes that makes sense, but unfortunately, we have been quoted more than £1,000 for the cheapest accounting service which is a bit too much for a small business that has an income of £12,000.

Thanks (0)
Replying to Careerladder85:
By ireallyshouldknowthisbut
09th Jan 2023 14:23

Careerladder85 wrote:

David Ex wrote:

Careerladder85 wrote:

… I hope someone will advise me on the best course of action.

The best course of action is to engage an accountant. Good professional advice is money well spent.

Hi, yes that makes sense, but unfortunately, we have been quoted more than £1,000 for the cheapest accounting service which is a bit too much for a small business that has an income of £12,000.

That sounds about right on the fees. Most of the time spent on a company will be the same if its £12k or £120k income. Indeed some of the nano companies we have are more of a pain than the larger ones as the client's records are often poor and the client fails to appreciate how much work they are. Think of it like taking your car down the shops in the winter. It will take you just as long if you take it round the corner or 5 miles, as its not the journey that takes the time, its deicing it.

Rather than keep on digging a bit hole for yourself you may well find if you cant afford to pay for advice out of your £12k income, you have picked the wrong business structure.

I would not normally recommend a company for anything at this level unless the clients circumstances are very specific.

I guess you might be able to find someone do this for you for £400-500, but pay peanuts and you are likely to have purchased a monkey and likely to cost you in the longer term, or the accountant would have plenty of work at market rates.

Thanks (4)
Replying to ireallyshouldknowthisbut:
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By Careerladder85
09th Jan 2023 14:36

ireallyshouldknowthisbut wrote:

Careerladder85 wrote:

David Ex wrote:

Careerladder85 wrote:

… I hope someone will advise me on the best course of action.

The best course of action is to engage an accountant. Good professional advice is money well spent.

Hi, yes that makes sense, but unfortunately, we have been quoted more than £1,000 for the cheapest accounting service which is a bit too much for a small business that has an income of £12,000.

That sounds about right on the fees. Most of the time spent on a company will be the same if its £12k or £120k income. Indeed some of the nano companies we have are more of a pain than the larger ones as the client's records are often poor and the client fails to appreciate how much work they are. Think of it like taking your car down the shops in the winter. It will take you just as long if you take it round the corner or 5 miles, as its not the journey that takes the time, its deicing it.

Rather than keep on digging a bit hole for yourself you may well find if you cant afford to pay for advice out of your £12k income, you have picked the wrong business structure.

I would not normally recommend a company for anything at this level unless the clients circumstances are very specific.

I guess you might be able to find someone do this for you for £400-500, but pay peanuts and you are likely to have purchased a monkey and likely to cost you in the longer term, or the accountant would have plenty of work at market rates.

Hi, thank you for your reply and your thoughts, I appreciate it!

It seems that I really need an accountant if I were to go down this route, even if it costs 1/12 of the business's income.

Alternatively, if I just leave everything as it is, I'll probably run into problems a few years down the road. CGT allowance will be close to nothing and so it will be more costly to transfer the assets to my Ltd company. Also, everything will be taxed at a higher rate for personal tax and national insurance, compared to a Ltd company.

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Replying to Careerladder85:
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By David Ex
09th Jan 2023 14:59

Careerladder85 wrote:

Hi, yes that makes sense, but unfortunately, we have been quoted more than £1,000 for the cheapest accounting service which is a bit too much for a small business that has an income of £12,000.

Why would you incorporate a business with an income of £12,000? I assumed your business was going to grow.

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Replying to David Ex:
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By Careerladder85
09th Jan 2023 15:05

Hi David,

The reason for transferring this asset to a Ltd company is planning for the future. We are both basic rate tax payers. We expect the website to generate 25k in two years time. Thus, we can pay ourselves low salaries (£9,100 or £11,908), some tax-free dividends and low rate of tax (corporation tax at 19%). Having a registered Ltd company name also helps our brand and image.

None of this is guaranteed, of course. It could still be generating 12k after two years.

Is the transfer of assets worth it in this situation?

Thanks (0)
Replying to Careerladder85:
paddle steamer
By DJKL
09th Jan 2023 17:57

Compare the tax savings (if any) with the compliance costs (an accountant) and the opportunity cost of your time managing all this.

Who valued the asset?

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Replying to Careerladder85:
Melchett
By thestudyman
09th Jan 2023 20:46

I do think still, even 25k is still probably not going to be very tax efficient, but just my opinion. Accountants in practice would strongly advice against incorporating with revenue topping £25k. Of course revisit the conversation if expectations increase.

Regarding the brand image I do not see what extra benefit this will bring with being in a limited company.. There are many many sole traders (and partnerships) with successful businesses, and if you provide a good service, customers really don't care about the setup of the business.

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VAT
By Jason Croke
09th Jan 2023 14:47

Appreciate the OP's honesty, but as others have posted, there are quite a lot of questions here and with loads more questions to ask in terms of why there is no money to buy the asset, etc.

I'm struggling to see why you setup a NewCo to acquire the website, especially when the asset is worth so little/generates little income. Anybody can set up a NewCo for £15 but the bigger question is why?

Your questions are about Business Asset Disposal Relief, gifting assets without NewCo paying for it, and avoiding tax in general (Directors Loan over several years), so all seems a lot of effort for £12k income per year unless you are individually higher rate tax payers or the values you are talking about are much higher than than you are saying?

I never see paying for an Accountant as a cost, I see it as planning for the future and avoiding future problems, you are paying for a risk assessment and an appropriate strategy for the business, get that wrong at the start and it'll take more time and money to fix, and not everything can be fixed.

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Replying to Jason Croke:
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By Careerladder85
09th Jan 2023 14:57

Jason Croke wrote:

Appreciate the OP's honesty, but as others have posted, there are quite a lot of questions here and with loads more questions to ask in terms of why there is no money to buy the asset, etc.

I'm struggling to see why you setup a NewCo to acquire the website, especially when the asset is worth so little and generates so little income. Anybody can set up a NewCo for £15 but the bigger question is why?

Your questions are about Business Asset Disposal Relief, gifting assets without NewCo paying for it, and avoiding tax in general (Directors Loan over several years), so all seems a lot of effort for £12k income per year unless you are individually higher rate tax payers or the values you are talking about are much more than you are saying?

Also appreciate the OP can't afford advice, so in that situation you'll just have to do more Googling and research and do what you think is right.

I never see paying for an Accountant as a cost, I see it as planning for the future and avoiding future problems, you are paying for a risk assessment and an appropriate strategy for the business, get that wrong at the start and it'll take more time and money to fix, and not everything can be fixed.

Hi Jason,

Thank you for taking the time to reply, I appreciate it!

Funnily enough, this is our only income and we are both basic rate taxpayers. I think knowing this will make you more furious about all the hassle for an asset that generates 12k per annum!

However, please hear me out.

The reason for transferring this asset to a Ltd company is planning for the future. We expect the website to generate 25k in two years time. Thus, we can pay ourselves low salaries (£9,100 or £11,908), some tax-free dividends and low rate of tax (corporation tax at 19%). Having a registered Ltd company name also helps our brand and image.

In your opinion, is it not worth it?

Ps: I 100% agree that paying an accountant is more of future planning/risk assessment rather than a cost/liability.

Many thanks!

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Replying to Careerladder85:
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By David Ex
09th Jan 2023 15:13

Careerladder85 wrote:

Thus, we can pay ourselves low salaries (£9,100 or £11,908), some tax-free dividends and low rate of tax (corporation tax at 19%).

As you may be aware, the “tax free” dividend allowance is being reduced from this April.

https://www.gov.uk/government/publications/reduction-of-the-dividend-all...

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Replying to David Ex:
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By Careerladder85
09th Jan 2023 15:28

Yes, I was aware.

So overall, you don't think it's worth incorporating given the low income, negligible tax benefits from dividends etc., and owners being basic rate tax payers?

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Replying to Careerladder85:
VAT
By Jason Croke
09th Jan 2023 16:11

I doubt anyone here will give you the answer, as that would would constitute giving advice and nobody knows enough abut you or your business/personal situation to give correct advice, not that we are allowed to give advice anyway, as per the T&C's of this website.

If you need certainty, then its something you'll need to engage/pay for, else just continue your Googling and research on the internet and form an opinion you are happy with.

January is a very busy time for Accountants and few will have time to take calls from non-clients trying to obtain complex tax planning for free when the Accounts have tight personal tax deadlines to fulfil.

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Replying to Jason Croke:
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By Careerladder85
09th Jan 2023 16:41

Thanks for the info.

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Replying to Jason Croke:
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By Careerladder85
09th Jan 2023 16:42

I think, all the questions boil down to simple concepts:

• Can couples combine their CGT allowance to sell an asset (Yes)
• Whether a website’s total market value is considered for CGT (Yes)
• Can a director’s loan/asset invoice be paid over a number of tax years (Probably – I assume)
• Can an asset be gifted to own Ltd company (No/too complicated – I assume)
• Can Business Asset Disposal Relief be utilised by company directors (Yes)

It’s unfortunate that none of these questions were engaged or answered. It’s my fault for giving too much information and over-complicating everything. Lesson learned, I'll get to my Googling/researching.

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Replying to Careerladder85:
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By Hugo Fair
09th Jan 2023 17:22

There's nothing wrong with your self-generated answers (to your own questions) ... but there is every likelihood that they are answers to the wrong questions.

And, no, you haven't given "too much information" - quite the contrary, which is why the most correct answers would all have been the same ... 'it depends' (aka 'not in all circumstances')!

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Replying to Hugo Fair:
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By Leywood
09th Jan 2023 17:37

DIY will end up costing the OP more than the Accountants fees.

Shortsighted.

This sort of post expecting professionals to provide advice for free is becoming a bigger joke day by day on this forum.

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Replying to Leywood:
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By Careerladder85
09th Jan 2023 18:33

Leywood wrote:

DIY will end up costing the OP more than the Accountants fees.

Shortsighted.

This sort of post expecting professionals to provide advice for free is becoming a bigger joke day by day on this forum.

Does insulting people make you feel good about yourself?

And did you just shamelessly say that you won't share any information to help another person unless you're paid for it? What does that make you? Nobody is asking you to file accounts, complete tax returns, produce financial reports, perform account analysis, provide financial consultants, etc. for free. These are just some accounting questions on a public forum about accounting - if you have nothing useful to contribute, it's best to keep quiet.

Btw, I am a qualified information, advice and guidance officer by profession. I like to help people, I never charge people for 5 or 10-minute chats and provide all my services for free for disadvantaged students who are unable to afford professional career advice. I guess, not all people are alike. Thanks for confirming this.

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Replying to Careerladder85:
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By David Ex
09th Jan 2023 20:27

Careerladder85 wrote:

These are just some accounting questions on a public forum about accounting - if you have nothing useful to contribute, it's best to keep quiet.

Btw, I am a qualified information, advice and guidance officer by profession. I like to help people, I never charge people for 5 or 10-minute chats …

Accountants are regulated by law and professional bodies. It’s entirely unprofessional to offer advice without having adequate knowledge of a client’s affairs.

And if there’s one thing that won’t win you any fans it’s you, a non-accountant who joined the site yesterday, telling accountants and regular contributors how they can and can’t use the site.

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Replying to David Ex:
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By Tax Dragon
09th Jan 2023 20:39

Never mind knowledge of the financials, you need knowledge of who it is. That is, if you plan to advise.

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Replying to Hugo Fair:
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By Careerladder85
09th Jan 2023 18:18

Hugo Fair wrote:

There's nothing wrong with your self-generated answers (to your own questions) ... but there is every likelihood that they are answers to the wrong questions.

And, no, you haven't given "too much information" - quite the contrary, which is why the most correct answers would all have been the same ... 'it depends' (aka 'not in all circumstances')!

I have given more than enough information to give context, that's not the issue.

The issue, it seems, is of someone asking and expecting any bit of information/advice for free.

I explained I can't afford the £1,000 accounting fee for a small business that doesn't even generate £12,000 a month. I am doing my own research and asking these questions to experienced professionals is part of it.

The most correct answer it seems would be, "Go ahead and purchase accountant services and don't expect any answers for free." Thanks.

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Replying to Careerladder85:
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By Leywood
09th Jan 2023 18:24

But you really don’t know how to go about that research, because you don’t know what you don’t know!! Which is why this could costs you very dearly!

You need to understand the value of the advice a good professional can provide, although I suspect we all banging our heads against a brick wall.

You are being quoted for professional skills acquired over several years. Just as you do with a good dentist or plumber. Eg

Boiler breaks down
Plumber hits it with a hammer and it starts working.
Plumber promises to send customer a bill.
Bill is for £201.00
Annoyed customer asks for itemised bill.
Plumber sends itemised bill :
Hitting Boiler with Hammer £ 1.00
Knowing where to hit it : £ 200.00

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Replying to Leywood:
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By Careerladder85
09th Jan 2023 18:48

Leywood wrote:

But you really don’t know how to go about that research, because you don’t know what you don’t know!! Which is why this could costs you very dearly!

You need to understand the value of the advice a good professional can provide, although I suspect we all banging our heads against a brick wall.

You are being quoted for professional skills acquired over several years. Just as you do with a good dentist or plumber. Eg

Boiler breaks down
Plumber hits it with a hammer and it starts working.
Plumber promises to send customer a bill.
Bill is for £201.00
Annoyed customer asks for itemised bill.
Plumber sends itemised bill :
Hitting Boiler with Hammer £ 1.00
Knowing where to hit it : £ 200.00

Where exactly have I said that I don't value professional advice?

I value the time, effort and the tens of thousands of pounds that have been spent by people to become qualified and reputable accountants. I get that. That doesn't mean that they can't share any of their knowledge or experience with others unless they are paid for it. Imagine if all the doctors, engineers, teachers and other professionals had your attitude to life!

Nobody is asking you to file accounts, complete tax returns, produce financial reports, perform account analysis, provide financial consultants, etc. for free. These are just some accounting questions on a public forum about accounting - if you have nothing useful to contribute, it's best to keep quiet.

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Replying to Careerladder85:
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By Leywood
09th Jan 2023 18:59

Accountancy is not just about filing accounts and tax returns, its about giving tax advice. You are on here looking for free tax advice, you have clearly stated you didnt value the quotes you were given and then followed this up with a the woe is me attitude when you dont get free advice from respondents.

This is not a forum for members of the public to get free advice. It is for Accountants and Tax professionals to assist each other with technical issues.

Being rude and telling Accountants who are entitled to be on here to shut up is just the typical freeloading business owner response we all have seen a lot of on here.

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 19:18

Are you qualified to know what is useful?

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 20:36

"Imagine if all the doctors, engineers, teachers and other professionals had your attitude to life!"

But they do. They all expect paying for their time.
I think you are digging a hole for yourself because you are not getting your questions answered.
You should realise by now that there's no quick answers to your questions without a proper conversation.

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Replying to Careerladder85:
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By gillybean04
10th Jan 2023 01:24

"Imagine if all the doctors, engineers, teachers and other professionals had your attitude to life!"

You mean those professionals who are currently striking or voting on striking for better pay deals because they don't work for low pay, never mind for free?

To be clear, I'm not half as qualified or experienced as some others who have responded. Yet even I recognised several issues which would require further discussion, investigation or information to even get close to being able to provide any sort of reliably accurate answer.

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 18:44

Do you mean turnover/income of £12,000 a month or a year?

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Replying to petersaxton:
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By Careerladder85
09th Jan 2023 18:49

petersaxton wrote:

Do you mean turnover/income of £12,000 a month or a year?

A year, unfortunately.

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Replying to Careerladder85:
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By David Ex
09th Jan 2023 16:42

Careerladder85 wrote:

Yes, I was aware.

So overall, you don't think it's worth incorporating given the low income, negligible tax benefits from dividends etc., and owners being basic rate tax payers?

As Jason says, no one can or should be offering you advice on here. Apart from anything else, there are probably many factors beyond tax that might influence the decision to incorporate or not. In fact you said “Having a registered Ltd company name also helps our brand and image” which suggests that tax isn’t your only concern.

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 16:26

What made you suggest those particular salaries?

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Replying to Careerladder85:
paddle steamer
By DJKL
09th Jan 2023 17:58

If no other income what are your personal allowances currently doing?

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Replying to DJKL:
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By Careerladder85
09th Jan 2023 18:52

DJKL wrote:

If no other income what are your personal allowances currently doing?

Unused at the moment.

I'm just thinking in the long-run it may be more beneficial to be a registered company instead of a sole trader, for example, if the business hits the 25-30k mark.

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 18:57

Why dont you pay out salaries?
Who would run your payroll?

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Replying to Careerladder85:
By petersaxton
09th Jan 2023 20:38

Would you be expecting to do your own company accounts then?

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Replying to Careerladder85:
paddle steamer
By DJKL
10th Jan 2023 09:15

Surely as a partnership the £25k would het mopped up by the two personal allowances so no tax would be payable.(2x £12,570= £25,140) Yes class II and some class IV to pay but also has advantages re earning being qualifying years for future state pension entitlement.

If you really want a body corporate an LLP might work but accounts wise they can be/tend to be more complex than a Ltd so not sure that helps with KISS.

( I do sort of understand the wish for a limited company re outward presentation, at least in some cases, but really not sure it is that important with a website, besides these days Limited Companies are sooooo common, everyone has one, so stand out by not having one)

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By Eighties Kid
09th Jan 2023 19:34

Does the £1k fee include advice on the incorporation per the questions in your OP? If so, sounds great value.

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By petersaxton
09th Jan 2023 21:01

The OP complains that he doesnt get answers to his questions, yet when questions are asked that might help him - he doesnt answer!

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By Catherine Newman
10th Jan 2023 00:22

Hi. As everybody else has said, you shouldn't have set up as a limited company and it smacks of "my made down the pub" and as has been said January is terrible for tax advisers and it is the wrong time of year to ask for free advice. Please PM me and see what I can do for a fee, which will be lower than you have been quoted.

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