As a Delivery Driver or someone that works in the gig economy, one trading option is to operate as a limited company.
So what are some of the advantages of running a Limited Company as delivery rider? Here is some examples:
- Being as tax efficient as possible is probably your main objective. Trading as a limited company can be more tax efficient due to dividends not attracting National Insurance and having lower tax rates. Limited companies in the UK currently pay only 19% Corporation Tax on profits, whereas sole traders pay 20-45% Income Tax on their profits. This offers greater flexibility for tax planning.
- Trading as a limited company can appear more professional as well as looking more secure prospect to investors.
- Reduced personal liability – A benefit of forming your own company is limited liability protection. What this means is that if your company runs into trouble, your personal assets will be secure. This is because a limited company is treated as a separate legal entity; a legal ‘person’ in its own right. Therefore, the business is entirely separate from the people who own and manage it.
- By setting up a company, you can reduce your Income Tax and National Insurance Contributions (NIC) by taking a combination of a salary and dividends. If you keep your director’s salary below the NIC Primary Threshold (PT), you will not have to pay any Income Tax or Class 1 National Insurance on those earnings. Furthermore, the company will not pay Corporation Tax on the salary, because wages are a deductible business expense.