Limited Companies for IT Contractors, Freelancers and Consultants

There are many reasons why so many people decide to contract through their own Limited company as opposed to working through an umbrella company . . .

  • It is the most tax efficient way of working - you can expect to take home around 75% - 80% of your contract value whereas you might only take home approximately 60% - 65% of your contract working through an umbrella company.
  • You are able to claim for a much wider range of expenses.
  • There is much less personal risk compared to being a sole trader, as any financial problems that you may encounter will be considered separate to yourself.
  • You have complete control over your financial affairs.
  • It can make you look more professional - certain PLCs or larger Limited companies will usually only work with other registered Limited companies.

For some people of course, the Limited company route won’t be the best option. For example, if your contract is short-term and you expect to earn less than £25,000, you may be better off trading through an umbrella company. Visit our Limited v’s Umbrella page for more information.

As a Limited company contractor, you benefit from paying less national insurance over an umbrella company. On a typical contract of around £350 per day you will pay around £300 a week in NI through an umbrella company whereas with your own Limited company you will pay just £30, so the NI savings alone come to about £12,000 a year assuming a 45 week working year. Read our plain English Contractor Tax guide for more information.

As a Limited company contractor you are also eligible for the Flat Rate VAT Scheme. This is an incentive that was introduced by the government to simplify taxes. It allows contractors working through their own Limited company – and who are VAT registered – to charge VAT on invoices at the standard rate (20% in 2013) but pay back HM Revenue and Customs at a lower rate (typically 14.5% - however rates do vary subject to your profession). In addition to this, your first year of trading allows you to pay an additional 1% less in VAT, providing you with additional income, just by being on the scheme.

By taking the Limited route, you set up, own and run your Limited company usually appointing yourself as director and shareholder.

As the director, you keep complete financial control of your company so you are not waiting on any middle man to collect your money. You will be in complete control of your invoicing, your company bank account and deciding how much to pay yourself. This can seem intimidating, with all the various factors to take into consideration, however any good contractor accountant can advise you and support you every step of the way.

When it comes to working through your own Limited company, you are seen as a completely separate entity to your business, which means that it is the company that is responsible for its own debts – this is what is known as ‘limited liability’. This basically means that should your company get into financial difficulty, you would not lose any of your personal assets.

For a full list of the advantages and disadvantages of working as a Limited company, click here.

How to set up your own Limited company

The idea of setting up your own Limited company might seem both daunting and time consuming, but it is much easier than you may think.

To set up your own Limited company there are a few easy steps you will need to take:

  • Firstly you will need to have your company name decided. You can check that your company name is available by using our free company name checker.
  • Then you will need to form your Limited company. This will take you no more than five minutes on SJD’s website with your company formed within a few hours.
  • SJD’s company formation package is £125 plus VAT, which includes; help organising your company bank account, registering the company for VAT and PAYE and advice on the optimum share structure of your company.

If you have any further questions about setting up your own Limited company, please call our New Enquires Team on 01442 275789 or email janice@sjdaccountancy.com.

Alternatively, speak to a member of our New Enquiries team who can complete the company formation process over the phone for you.

Appointing an accountant

After forming your Limited company, your next step is to appoint a good accountant. Many make the hasty decision of appointing their local accountant for convenience in all the excitement of setting up their Limited company, who although may be suitably qualified, is not a specialist contractor accountant.

A good contractor accountant will be able to advise you on complex financial issues, tax deadlines and changes in legislations such as IR35, but ultimately they will make sure that you keep as much of your hard earned turnover as you can.

Essentially look for a firm of accountants who:

  • Give you a dedicated point of contact
  • Is a specialist in the contractor market
  • Provides the opportunity to meet with your accountant (tax is complicated so it's nice to be able to chat things over face to face if you need to)
  • Nationwide offices (so you don't have to drive 400 miles to see your accountant) 
  • Offers a low cost all inclusive fixed fee
  • Good reputation - external awards are good indicators
  • Offers some kind of guarantee on their service (some companies will tell you anything to sign you up and the service can be different to what's been promised)

SJD Accountancy are the UK’s largest accountants to contractors, with over 15,000 Limited company clients. We offer all clients an all-inclusive fixed fee accountancy package, starting from £120 + VAT per month. This includes:

  • Year-end accounts*
  • Corporation tax
  • Payroll bureau
  • Dividend administration
  • Dealing with HM Revenue and Customs and Companies House
  • Quarterly VAT Calculations 
  • Support with Annual Returns
  • Personal Taxation
  • Access to your own dedicated accountant* for all help and advice
  • Free bookkeeping software

Check our packages for more detail.

All with the reassurance of a money back service guarantee. There is no minimum length of time you need to appoint us and there are no entry or exit fees.

Appoint SJD Accountancy the UK's largest contractor accountants and never worry about your tax or accountancy affairs again.

If you have any questions about contracting or would like any further advice please call our new client services team on 01442 275789 or email janice@sjdaccountancy.com.

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your Emails received by 4pm on any normal working day will be answered the same day. Should it be necessary to leave a telephone message it will be answered same day/following day latest or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.