Thoughts?

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Williambridge

Original Poster:

34 posts

159 months

Wednesday 1st January
quotequote all
At a cross roads here.

Currently been in the same industry for 15 years, still a little way from 40 years of age.

I am employed full time with my current employer and I have hit a ceiling in career growth and I earn a good salary of mid 70s.

I believe I could start a business in a similar but not the same industry so that there is no clash of interest. But if my current employer was aware this would not be looked at positively.

My question is, is it possible to go from sole trader to a Ltd company later on down the line. In turn, I believe this would keep me off of any visible HMRC records.

My second question, if I was a sole trader for say 3 years and never drew any money out to "pay" myself would I still submit my own self assessment whilst still being in full time employment?

M4cruiser

4,338 posts

162 months

Wednesday 1st January
quotequote all
If you have income from being a sole trader, then that's income you'd have to declare at the end of the tax year, i.e. by January of the following year.

Makes no difference that it's in a business bank account. The money is yours. So you can't just not "pay yourself".



Panamax

5,706 posts

46 months

Wednesday 1st January
quotequote all
Williambridge said:
I am employed full time

I believe I could start a business in a similar but not the same industry
What does "start a business" mean? Will it have employees, premises, vehicles? What's your competitive edge in this new business? How will it be funded? Where will the customers come from? Will you be able to get third party liability insurance?

Yes, a business in your own name can later be moved into a limited company but if that's where you think it should be then it makes sense to have a limited company right from the outset. If you use a limited company, make sure you don't give any personal guarantees regarding its liabilities.

Williambridge

Original Poster:

34 posts

159 months

Wednesday 1st January
quotequote all
Panamax said:
Williambridge said:
I am employed full time

I believe I could start a business in a similar but not the same industry
What does "start a business" mean? Will it have employees, premises, vehicles? What's your competitive edge in this new business? How will it be funded? Where will the customers come from? Will you be able to get third party liability insurance?

Yes, a business in your own name can later be moved into a limited company but if that's where you think it should be then it makes sense to have a limited company right from the outset. If you use a limited company, make sure you don't give any personal guarantees regarding its liabilities.
no employees apart from myself
One vehicle small van
Competitive edge typical business proven record
Personally funded solely myself
Customers come from previous clients from my previous employment over 3 years ago.
Insurance possible


I don't want to cause a change of relationship with my current employer so focus atm is ensuring this isn't on their radar.

Mr E

22,344 posts

271 months

Wednesday 1st January
quotequote all
Your contract might have a “you have to tell us about any other paid work you do” type clause.

Countdown

43,622 posts

208 months

Wednesday 1st January
quotequote all
Williambridge said:
My question is, is it possible to go from sole trader to a Ltd company later on down the line. In turn, I believe this would keep me off of any visible HMRC records.
Yes

Williambridge said:
My second question, if I was a sole trader for say 3 years and never drew any money out to "pay" myself would I still submit my own self assessment whilst still being in full time employment?
You're perhaps getting "Sole Trader" and "LtdCo" mixed up. If you're a Sole Trader you're taxed on the profits you make regardless of whether you "pay yourself" or not. basically ALL your profits are taxed. If you were in a LtdCo any profits would be liable to Corp Tax and you'd be taxed on them personally at the point you withdrew any profits via dividends. There are various tax mitigation methods that you could use as a LtdCo which I won't bore you with smile

M4cruiser

4,338 posts

162 months

Wednesday 1st January
quotequote all
Mr E said:
Your contract might have a “you have to tell us about any other paid work you do” type clause.
Most employment contracts do have this or similar.
I guess the OP is willing to take the risk.
I was once employed in a contract which had a "You're not allowed to do any other work, paid or unpaid" type clause.

alscar

6,059 posts

225 months

Wednesday 1st January
quotequote all
M4cruiser said:
Mr E said:
Your contract might have a “you have to tell us about any other paid work you do” type clause.
Most employment contracts do have this or similar.
I guess the OP is willing to take the risk.
I was once employed in a contract which had a "You're not allowed to do any other work, paid or unpaid" type clause.
Seems quite a risk to take though ie a fledgling company which if not declared / permission requested could cause issues with employer if they find out ?
If a totally different industry then existing company may be ok with it although I would guess then “ workload and commitment “ may be questioned ?

Steve H

6,092 posts

207 months

Wednesday 1st January
quotequote all
The tax issue shouldn’t ping up to your current employer, especially if you are just filling out self assessment for any profits you make.

But hoping to piss in their pond, or anywhere near it, without getting noticed operationally sounds optimistic.

StevieBee

14,032 posts

267 months

Thursday 2nd January
quotequote all
The biggest question you need to ask yourself is how you would build a viable business whilst holding down a 9-5 job. It's not impossible but is exceptionally difficult and high-risk for anything other than a side-hustle.

The months and years following the start up of a business will inevitably require a very significant amount of your time; winning the work, doing the work and the necessary admin obligations. You could easily end up with two 9-5 jobs and burn yourself out very quickly, ultimately leaving you with no job and no business.

If you are convinced at the viability of your business idea.... just do it!

I realise that this is an easy thing to say but the reality is that the business will either work or it won't and there's a greater chance of it working if you devote all of your time energy to it.

With regards to your current employer, is this a big company or SME..... do you know the owner?

Eric Mc

123,505 posts

277 months

Thursday 2nd January
quotequote all
The OP needs to be aware as to how the taxation of the self employed works.

The true meaning of "self employment" relates to when a person runs their own business in their own name. The correct term is really "sole trader".

As has been pointed out, in these circumstances the individual pays tax and NI on the business profits, whether they extract any money out of the business for themselves or not. For example, if the business made a taxable Net Profit for the year of £80,000 and the individual only extracted £50,000 for themselves as "Drawings", the individual pays tax and NI on the entire £80,000 profit.

If the business is set up as a limited company, things are a bit different. In a similar situation (i.e. profits of £80,000), the business is liable to Corporation Tax on £80,000. However, if the individual drew a SALARY of £50,000 GROSS (i.e. before PAYE and NI), then the company would pay Corporation Tax on just £30,000. However, the salary of £50,000 would also have been chargeable to PAYE Income Tax and Class 1 National Insurance - both Employee's AND Employer's.

If the individual elected to NOT draw a salary from the company but wihdraw a £50,0000 dividend instead, the company would be back to being charged Corporation Tax on £80,000 and the individual would be liable to Income Tax on the dividend. Dividends are NOT subject to any NI charges.

Regarding Self Assessment, once an individual sets up in business as a sole trader, they will need to register to complete self assessment tax returns before the end of the tax year in which they commenced trading. Most owners/directors of limited companies also need to complete self assessment tax returns.

Finally, anybody contemplating operating as a sole trader needs to be aware of the masive changes being implemented on 6 April 2026 the new regarding Making Tax Digital (MTD) system.