I have a full-time job, and as a second job I work as a contractor for another company. Since the income I get from my first job is enough to pay for my living expenses, I am currently saving and investing the income I generate from my second job as a contractor.
I was thinking of setting up a Limited Company (based in the UK) that I would use to offer my services as a contractor. Since I don't need this money to pay my living expenses, I was considering investing in real estate or the stock market through this Limited Company. In other words, the company would have revenue coming from the services I offer, and the company (of which I'm the director and only shareholder) would invest this money. If in the future I want to extract money from the Limited Company, I could pay myself an income, or pay dividends.
I have several questions about this:
- Am I allowed to do this? i.e. investing in financial instruments or real estate through a Limited Company instead of doing it personally.
- Which is more tax-efficient -- to pay income tax on the money I'm being paid as a contractor and then investing this money, or to charge the money through a Limited Company and investing the money through it?
- Would I be allowed to buy certain things with company's pre-tax money, as company expenses? If so, what sort of things?