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Limited company formation numbers on the up

Posted Jul 16, 2010

The number of limited company formations has started to rise once again following two years of falls, according to Companies House data.

The number of new companies registered at Companies House rose by 10% from 330,100 in 2008/9 to 362,300 in 2009/10, according to Wilkins Kennedy.

Following the credit crunch, the number of company formations dropped by 17% in 2007/8 and by 11% in 2008/9.

These figures could either show that the economy is emerging from the recession, or that more people are opting to go it alone following redundancy - or a mixture of both.

The accountancy firm points out that the recent Emergency Budget contains measures which should encourage small business owners further:

Positives for limited company owners

  • The reduction of corporation tax on small companies from 21% to 20% in April 2011 will make it even more advantageous for entrepreneurs to operate through their own companies, especially as the emergency budget left income tax and insurance contributions (NIC) unchanged. Income tax can cost up to 50% for higher rate taxpayers and national insurance contributions (NIC), now at 11%, will increase to 12% next year.

  • Instead of paying themselves a salary, which is subject to Income Tax and NIC, business owners can withdraw dividends out of their company's profits (net of corporate tax), which is free of tax as long as the amount doesn't exceed the basic rate Income Tax limit of £43,875.

  • The threshold for entrepreneurs' relief on CGT rising from £2 million to £5 million (with immediate effect) will allow business owners to pay only 10% of CGT on lifetime gains of up to that amount.

  • A £200 million top-up to the current £500 million Enterprise Finance Guarantee (EFG) scheme up until March 2011.

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