One of the main benefits of contracting via a limited company is that it is the most tax-efficient way to operate. Unlike a permanent or umbrella employee, you pay yourself in the form of a basic salary (typically low), and the remainder is drawn down in the form of dividends. Dividends are not subject to National Insurance Contributions, which results in a significant tax saving. As a company director, you also have a great deal of flexibility over when to take income out of the company, which has further tax planning benefits, and you can also benefit by transferring some shares to your spouse (if appropriate).
Limited companies pay Corporation Tax on their annual profits (at a rate of 20%), and VAT is added to all your invoices and repaid to HMRC each quarter, after allowing for any VAT you may have reclaimed on company purchases. To get started, all you will need to do is fill out the form on our compare the umbrella website to start the process for your new company, it is a quick process. You can incorporate directly with Companies House for under 20, although many contractors opt to leave the start-up process to one of our recommended accountants, who can also undertake a number of other initial tasks, such as setting up the company payroll, and registering the company for Corporation Tax and VAT.
Tax returns can be troublesome and difficult to keep track of especially if you have not studied any tax accounting. Luckily, you have us to take care of all your limited company tax returns. Simply avail our services and you won’t have to deal with anything on the tax end.