I have built up quite a good business as a music teacher with profits of about £80,000 a year. Should I incorporate my business?
The full answer to your question will involve a lot of detailed calculations concerning how much you want to draw from the business each year, what assets you use in the business – such as a car and musical instruments, and what other people may be involved – such as your spouse. However, your main consideration should be VAT. As a sole trader, the private tuition you provide is exempt from VAT. However, because the service is one of private tuition, if you provide the same service as an employee of your own company, that tuition must be subject to standard rate VAT. If your customers are individuals they will see your prices increase by 15% once you start trading through your company.