A client who is a composer explained that he was about to sign a major contract on a piece of work. This would bring in huge amounts of money in the second year but nothing in the first year.
I suggested that he form a limited company for his business. This would allow the income generated to be taxed on a much more even basis. He could therefore use the lower tax bands, and his actual tax would be far less than if he continued as a sole trader. As a sole trader, he would be liable to pay the highest rates of tax in the second year on a very high majority of income. As a limited company, income could be spread over two years, which would allow him to use up all the lower tax bands, and he would therefore pay a much lower rate of tax over the two years together.
If you are working within the creative industries and wish to find out how you can minimise the tax you have to pay on your income, contact Green and Peter on 020 8446 8100.