Limited Company
An efficient solution for contractors
working through a PSC
Limited Company
Operating via your own limited company (also referred to as a “personal service company”) is a business structure which suits lots of contractors who work outside IR35.
It is often one of the most tax efficient way to be paid. You can choose to pay yourself in a variety of ways, usually a combination of a regular small salary and topped up with dividends from the profit of the company.
You’ll pay personal tax through a self-assessment form and complete mandatory company filings with Companies House. You can also claim various business expenses as long as they are incurred wholly and exclusively for the purpose of the trade.
Benefits of Ltd Co
Control of your finances
A limited company is a business that operates under its own legal structure and handles its payroll, taxes and holiday pay.
While there are additional legal and administrative responsibilities involved in running a limited company, many contractors find that the benefits outweigh the extra effort.
​
​Limited liability
Your personal assets are protected if your company runs into trouble. This is because a limited company is treated as a separate legal entity—a legal ‘person’ in its own right. As such, the company is entirely separate from its members and directors.
​
Tax efficiency​
​You can minimise your tax liability by taking a combination of a directors salary through PAYE and dividends.​ If you go down this route, you will operate through your own company and supply professional services to agencies and end-clients.
How it works
1. Determine whether Ltd Co is right for you
it is worth researching or speaking to an expert on how to operate. Running a limited company comes with several legal obligations, including registering with Companies House, filing annual accounts and tax returns, and complying with HMRC regulations. You will also need to ensure you’re adhering to NI and PAYE regulations. It's a good idea to check with your agency/end-client to ensure that Ltd Co is a viable option for your assignment.
​
2. Super quick onboarding
You will need to complete a registration form, provide right to work in the UK and your company details including Certificate of Incorporation, Insurance policy and VAT number (if applicable). Terms of business will be issued and you'll receive a welcome email outlining the next steps.​​
​
3. You submit timesheets to your agency or client
We'll process each timesheet and create a self-billing invoice. We’ll then invoice the client accordingly.
​
4. Paying your invoice
As soon as we’ve received the money to pay you, you will be paid directly into your business bank account. The only deduction from your gross rate is a small processing margin.
​
5. Your pay advice is available to view
You will receive a message to notify you that a payment has been processed through our payroll. You will be able to log in to our secure portal to access your pay advice.
FAQ's
What is a limited company? A legal business structure that is incorporated through Companies House and provides limited personal liability. This prevents its owners from being legally responsible for its debts, except for the amount they have invested. It can be a tax-efficient way to get paid, and gives you financial control over company funds.
Can anyone set up a limited company? In general, most people can set up a limited company. However you should consider whether this is the right option for you. If your assignment falls inside the scope of IR35, you should explore other options such as Umbrella PAYE. You should also consider the length of the contract. If you only intend on contracting for a short period of time, the ongoing responsibilities of running a limited company might not be worthwhile. If you’re looking to contract long-term and your earnings bring you into the higher tax bracket, you might consider starting a limited company.
Do I need to pay tax? Yes. If you aren’t already registered, you should register for Self-Assessment, as you’re now a director and likely to receive income that isn’t taxed at source (i.e. dividends), you will need to file a tax return each year. If VAT is applicable, you’ll need to register for this with HMRC. If you will be paying yourself a salary, you should also register for PAYE so you can make the required submissions to HMRC to confirm the salaries paid.
Am I self-employed? Company Directors are not self-employed but are usually employed by their registered limited company. When you have a limited company, you can’t simply think of the company’s money as your own as the money belongs to the company, not to you. The limited company will be hired to do the work and then you, as an employee of the company, will carry out the work on behalf of the company. Invoices for your services will be issued by the company and money received should be paid into the business bank account. Any money paid to you should be subject to PAYE. For the purposes of IR35, if you look like a self-employed person working for the end client rather than an employee, you will fall outside of IR35. If the assignment is inside IR35, operating via a limited company would not meet the off-payroll requirements and you should explore other options such as Umbrella PAYE.
Do I need my own insurance? Yes, as a limited company director you must have an insurance policy to operate via a PSC. Typical insurance consists of Public/Products Liability. You may also require Employer’s Liability cover if you operate a business which employees a second person or you have registered for PAYE to pay yourself a salary.
Do I need an accountant? Although this isn’t a legal requirement, we would strongly recommend engaging an accountant as its likely you will need come professional help with corporate tax affairs and personal tax position. You must adhere to strict record-keeping, filing and accounting requirements to comply with UK tax laws. An accountant can support with complex tasks involved with running a limited company. These include: oraising invoices ocompleting bookkeeping ocompleting and filing annual accounts osubmitted a yearly Confirmation Statement to Companies House ocompleting a tax self-assessment opayment of taxes including Corporation Tax, PAYE and VAT (if registered)
Do I need a business bank account? Yes. To begin trading as a limited company, you’ll need to set up a business bank account. The finances of a limited company are considered separate to the personal finances of a company director, so you’ll need to have a separate account for your business in goings and outgoings.
Will I receive holiday pay? Your contracting rate has 13.8% Employer's National Insurance and 12.07% holiday pay built in, however you won’t see this broken down on a payslip. You will be paid your contracting rate in full. We recommend holding back a portion of your pay for when you go on holiday, and remember to take your well-earned breaks!