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There are many ways of operating as a contractor; one possible route is to work as a limited company director. Operating through a limited company tends to be most suitable to those who are planning on contracting for over three months and are earning more than £25,000 annually, as they will be able to benefit most from the tax planning opportunities available.
This guide to limited company formation discusses the advantages of contracting through a limited company, how to form a limited company and the obligations that come with limited company ownership.
It is widely believed that working through a limited company is the most tax efficient way to operate as a contractor. As a contractor, limited company ownership allows you to remain in control of your accounts as you do not need to rely on any third parties to liaise with your clients and collect your earnings on your behalf. Working in this way can be perceived as being more professional, and having “limited” in your company name can give you an air of respect, which may come in handy when securing future contracting work. Working as a limited company director provides contractors with greater financial security, because they are seen as a separate entity, and so any debt that the company incurs is the company’s debt not that of its directors. This means that if your company was to encounter any financial difficulties none of your personal assets would be at risk.
Take a look at our guide to setting up a limited company for more information on getting started.
Forming a limited company is probably far more straightforward than you are aware of and is usually completed within three to six working hours. Unlike many other contractor accountants if you become a client of Nixon Williams we will set up your company free of charge. Whenever we form a limited company we will register your company for PAYE, VAT and Corporation Tax, as well as providing support in opening a business bank account with Metro Bank. To setup a limited company you will need a company name, address, at least one company director and at least one shareholder. If you are unsure of any aspect of the process then a member of our new business team will explain everything to you.
If you would like Nixon Williams to set up your limited company for you, the first step is to choose your company name and then fill in our limited company formation form. A member of our new business team will then get in contact with you and take you through the process.
Limited company ownership does come with some obligations, although the many advantages of operating through a limited company more than compensate for this. The main tasks that limited company directors are responsible for are completion of company accounts, submitting an annual return to Companies House and keeping track of client invoices and business expenses. Most limited company contractors say that they spend approximately 15 – 20 minutes a month carrying out administration based tasks.
Many limited company contractors decide to appoint an accountant to help them with their accounts and taxation requirements, the cost of which is usually less than they would be paying in umbrella company fees. When appointing an accountant you may want to consider opting for a firm that specialises in the contractor market as they will have experience dealing with issues that affect contractors such as IR35.
Nixon Williams are a firm of accountants that have been supporting contractors with all their taxation needs since 1995. As specialists in the contractor market the accountants at Nixon Williams are dedicated to providing the best accountancy advice, which is why they stay up-to-date with all current tax legislations that affect the contractor market. All Nixon Williams clients are assigned their own dedicated accountant who can be contacted as many times as the client wishes at no additional cost.
For more information about contracting through a limited company, company formation or the service that Nixon Williams provide, please contact us on 01253 362062.