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Is a Limited Company the best option for you?

Additional information will appear in this space if you click on any link on the left.

Contracting through a limited company can be a great way to maximise your income. It can also be a great way to stay in control of your personal income. But contracting through a limited is company is not always the best option for everyone.

Are you allowed to contract through a limited company?

A good place to start is to contact your employment agency and ask them if you can contract through a limited company. If you're not finding your contracts through a recruitment agency, but with your own marketing then you will most likely be able to get paid through a limited company. (Click here for more information on why you may not be able to work through your own limited company (IR35)).

Is a limited company the most tax efficient way to get paid?

To be able to calculate the most tax efficient option for you, we'll need some basic information. We’ll use this information to calculate the rate you’ll be taxed at for the different employment options in the UK.

Enter your gross pay (before tax):

Business Expenses:

As a director of a limited company you’ll be able to deduct valid business expenses. A valid business expense is an expense incurred ‘wholly and exclusively for business purposes’. These can incluse travel costs, accounting fees, computer equipment etc. (Click here for more information regarding business expenses.)

Please enter the average amount of business expenses you might incur while contracting through a limited company:

Average Expense Amount (if any):

Flat Rate VAT (Optional):

It might be possible for you to register for the Flat Rate VAT scheme. This could have a significant impact on your income. If you're contracting through an employment agency you can ask them if you'll be able to register for VAT. (Click here for more information abou the Flat Rate VAT Scheme.)

Are you able to register for VAT?	Yes	No	Not Sure
Please select the sector which most closely describes what you'll be doing in the next year:
				*

*Please complete and select all the necessary fields before calculating

Calculation Results:

Based on the information you entered we recommend . You can click on the 'Recommended - Why?' link below for a more detailed explanation of why we recommend this service. We also calculated the persentage you'll be taxed at for some other employment options. Needles to say the lower the persentage the better.

You can select a different option if you're not satisfied with our recommendation. Once you're satisfied with the selection, have a look to see if your company name is available

Taxed At:

24%

PAYE Employment

Taxed At:

21%

EasyLimited Bronze

Every Limited Company needs a unique name
Choose your Company Name:

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Taxed At:

19%

EasyLimited Silver

Taxed At:

18%

EasyLimited Gold

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The Flat Rate VAT scheme was introduced by HMRC to simplify VAT returns for small businesses and contractors with their own limited companies.

Under the flat rate vat scheme you pay VAT over to HMRC at a rate specific to your industry, but you still charge VAT at the normal rate (20%). The rate you pay to HMRC is always lower than the current VAT rate.

The result is a 'flat rate VAT profit'. In other words you recive more VAT than you pay. Please see our Contractors Guide to Flat Rate VAT for more information

Ask you employment agency if you can register for Flat Rate VAT if you're unsure.

IR35 is tax legislation introduced by HMRC in April 2000 to discourage the opening of limited companies by contractors for the sole purpose of gaining a tax advantage.

The legislation states that if a director falls inside the IR35 legislation then the Director will need to pay full PAYE and NI tax on all the income taken from the Limited company, in other words such a director can’t pay out any dividends.

The IR35 legislation is a complex piece of employment law legislation. Most recruitment agencies or clients will have an IR35 friendly contract (also known as the “opt out” contract) that a contractor will need to sign when a project or contract is accepted. It is important that contractors carefully consider the implications of the legislation, as signing an “opt out” contract on its own might not be enough to safeguard you should HMRC challenge you about IR35.

A number of companies offer legal advice, contract reviews and insurance to directors to cover you should you get challenged by HMRC about IR35. There is also a lot of talk that the new government are reviewing this piece of legislation and they are planning to simplify it so that it will be much easier to understand in future.

As a director of a limited company you'll be able to claim valid business expenses.
These include (but is not exclusive to):

Travel Cards
Mobile Phone
Internet / Broadband Access
Stationary, Postage, Printing
Landline
Parking
Computer Hardware / Laptops
Computer Software
Computer Consumables (like Printer Cartridges)
Memberships
Journals and Publications
Insurance
Training Courses

Your gross pay is the rate you work for. For instance if you get paid £15 per hour, enter 15 and select 'per hour'.

If you're contracting through an agency it might be worth asking them if they will give you an NI uplift if you decide to contract through a limited company. If this is the case, enter your rate including the NI uplift.

Business expenses will usually fluctuate from week to week, so yust add an estmated average amount.