Moving to Limited as a Contractor
It’s often said that contracting through your own limited company is a daunting task. In fact, nothing could be further from the truth!
Administering your own limited company, through a dedicated firm of accountants like SJD Accountancy, is simple, efficient and inexpensive; most importantly, it ensures that you legally minimise the amount you pay in tax so that you can retain the maximum amount from your contract.
Contracting through your own limited company does require a little more work than using a fully managed services company. However, please bear with it, the financial rewards are substantial – as much as a 40% increase over a managed Company.
Following the latest Budget announcements there are only two real options for contractors:
1. Work through a PAYE umbrella company and pay full income tax and full national insurance contributions on your entire earnings.
2. Operate through your own limited company, which remains the most tax efficient solution available. It is very important to stress that these must be genuine, one person Limited Companies and not a ‘scheme’ dreamed up by what is nothing more than marketing organisations.
A large percentage of employment services companies offering to set up Personal Services Companies or put you in a special scheme are wide open to attack by HMRC under the new guidelines. Clients are usually dealt with by call centre operators, not qualified accountants. They will manage hundreds of limited companies and have no idea about their clients or their client’s specific needs. You will also be lucky to speak to the same person twice.
Remember, if they don’t have Accountancy in their name they probably aren’t Accountants.
By comparison, contracting through your own limited company puts you in control and is the most tax efficient way of working. With the assistance of a good Accountant, it needn’t be hard work.
All you need to do:
1. Complete a simple spreadsheet – Each month you will need to send us a simple spreadsheet which shows your expenses and any income you have received from your contracts; this normally only takes 10-15 minutes to complete.
2. Invoice your clients We will provide you with a template invoice.
3. Correspondence – Simply send any correspondence you receive from HMRC, VAT office or Companies House directly to us and we will deal with it for you.
4. Business bank account – You’ll be responsible for handling your bank account. Simply ask your client or agency to pay directly into this account, you then move money into your personal bank account on a monthly basis for your dividends and salary.
Click here if you haven’t yet formed a limited company and here if you would like to become a client.
You may also find our step-by-step guide on How to Contract through your own Limited Company helpful and guide to: Take home pay through a limited company – The differences between the limited company and an umbrella company.
If you have any question about contracting through your own limited company or would like any further advice please either contact your SJD Accountant or call our new business team on 01442 232700 or e-mail firstname.lastname@example.org.