Working as a contractor through your own limited company in the UK is commercially rewarding and also very tax efficient. It is easy to forget, but the UK has one of the lowest rates of Corporation Tax in Europe. Before you decide to leave the UK as a contractor consider the following:
- All countries around the world have their own tax laws, some are very different and have some rather unusual restrictions. For example the Netherlands, where you will not be allowed to contract through your own limited company.
- You can of course trade and invoice through your UK company in many other countries. However, to do this effectively you will need to:
a) source expert tax help in the country you are working in, as you may be liable for additional tax, especially if you will be spending a considerable time overseas;
b) consider the implications with regards to your UK corporation and personal tax if bringing money back into the UK;
c) think about continuing your National Insurance contributions. If you don’t keep these up to date you may not be eligible for NHS treatment or your state pension.
- In some countries, it is unlikely, unless you are provided with a local resident visa, you will be allowed to open a bank account in local currency. You will therefore need to investigate how your client intends to pay you.
- The good news is, it is very unlikely that you will be the first person to have been asked to provide your services as a contractor to the client.
Your client or agent should be able to answer most of your questions. Also, other contractors are usually more than happy to provide a helping hand when it comes to explaining how they work and what pitfalls to look out for.
Other things to think about are currency exchange rates (just look at the £ – $ rate, definitely not a good time to be paid in dollars) and the sometimes high cost of expert tax advice in the country you are working in. This coupled with potentially higher corporation tax may actually take the shine off those higher daily contract rates.
Our advice is if you are just working overseas for a short while i.e. a couple of months and are invoicing from your UK limited company and being paid by a UK client, there is little to worry about. However, if you are considering working abroad for any length of time, it would be in your best interest to seek specialist advice.
If you are thinking of becoming a contractor / freelancer or have any questions about working through your own limited company please call our New business team on 01442 275789
Have you downloaded SJD’s Contractor Guides yet? If not, find below links to the key guides:
- Step-by-step Guide to Contracting through your own Limited Company.
- Comprehensive Contractors Guide
- Contractor Guide to Expenses
Limited vs Umbrella guide – Still working through an Umbrella company?
- Contracting in the UK
- Take home pay through a limited company – The differences between limited and umbrella companies.