Setting up as a sole trade is very simple, you register with HMRC as a sole trader and receive a unique tax reference number then you submit annual self-assessment returns.
You pay Tax & National Insurance on the profit you earn as a sole trader.
However at what point would you consider setting up a Ltd company? Setting up as a Ltd company can save you tax, there are also other benefits.
As a Ltd company you pay corporation tax on your profits currently 19% this will reduce to 18% from 2020.
If you pay yourself a dividend from the company the first 2,000 is tax free, any amount above 2,000 is taxed at 7.5% if you are a basic tax rate payer, or 32.5% for higher rate tax payers.
As a director of your Ltd company you have Limited Liability Protection, which means you are not responsible for the companies debts if the company goes bust providing that you have not been wrongful trading or you have acted negligently.
Becoming a Ltd company can be seen as a positive factor in the eyes of some lenders and may make it easier to obtain credit from suppliers.