For contractors, one of the biggest and most important decisions when leaving the world of full-time employment is the successful transition from a staff position to the director of a limited company.
Running your own limited company and being a company director is challenging but with the assistance of specialised Contractor accountant, it is no more difficult than any other form of trading. An accountant, depending on which firm you take on, will provide you with Limited Company Incorporation, PAYE registration, VAT registration, Business bank account set-up, a registered address and so on allowing you, the contractor, to focus on the job at hand.
Advantages of trading as a limited company:
-It is the most tax efficient way of working giving the contractor more take home pay, salary and dividends a typical take home rate can be around 75% - 80% of your contract
-As a contractor, a wider range of expenses can be claimed anything that is solely classed as a business cost such as accountancy fees, equipment, software, phones and travel
-Access to the Flat Rate VAT Scheme (If your VAT taxable turnover is less than 150,000, you could simplify your VAT accounting by calculating your VAT payments as a percentage of your total VAT-inclusive turnover. Although you cannot reclaim VAT on purchases, the Flat Rate Scheme can reduce the time that you need to spend on accounting for and working out your VAT)
-As director of the company, the contractor would have complete control and importantly RESPONSIBILITY of all financial affairs and business operations it does require some commitment
Unfortunately, there are some disadvantages:
-It can become tiresome, time-consuming and very messy if handled incorrectly it is essential to fully understand the director responsibilities and have an accountant you trust to handle the finances
-The cost of hiring an accountant or accounting firm can also vary, and can on first glance be expensive. Finding an accounting firm or accountant that you can trust may also be difficult
-As the company director, the contractor is ultimately responsible for ensuring the accounts have been prepared accurately and are submitted on time even if these tasks are carried out be an accountant
Previously, contractors had the option of trading under an umbrella company however these have been have diminished substantially in popularity. Although being very easy and simple to use, contractors found that their take home pay was considerably less, it was far less tax efficient and they had to pay for the privilege in using such companies.
It is important to consider all points and to understand the responsibilities as a contractor and company director - if you do have any questions contact a specialist Contractor accountant to help you.
Running your own limited company and being a company director is challenging but with the assistance of specialised Contractor accountant, it is no more difficult than any other form of trading. An accountant, depending on which firm you take on, will provide you with Limited Company Incorporation, PAYE registration, VAT registration, Business bank account set-up, a registered address and so on allowing you, the contractor, to focus on the job at hand.
Advantages of trading as a limited company:
-It is the most tax efficient way of working giving the contractor more take home pay, salary and dividends a typical take home rate can be around 75% - 80% of your contract
-As a contractor, a wider range of expenses can be claimed anything that is solely classed as a business cost such as accountancy fees, equipment, software, phones and travel
-Access to the Flat Rate VAT Scheme (If your VAT taxable turnover is less than 150,000, you could simplify your VAT accounting by calculating your VAT payments as a percentage of your total VAT-inclusive turnover. Although you cannot reclaim VAT on purchases, the Flat Rate Scheme can reduce the time that you need to spend on accounting for and working out your VAT)
-As director of the company, the contractor would have complete control and importantly RESPONSIBILITY of all financial affairs and business operations it does require some commitment
Unfortunately, there are some disadvantages:
-It can become tiresome, time-consuming and very messy if handled incorrectly it is essential to fully understand the director responsibilities and have an accountant you trust to handle the finances
-The cost of hiring an accountant or accounting firm can also vary, and can on first glance be expensive. Finding an accounting firm or accountant that you can trust may also be difficult
-As the company director, the contractor is ultimately responsible for ensuring the accounts have been prepared accurately and are submitted on time even if these tasks are carried out be an accountant
Previously, contractors had the option of trading under an umbrella company however these have been have diminished substantially in popularity. Although being very easy and simple to use, contractors found that their take home pay was considerably less, it was far less tax efficient and they had to pay for the privilege in using such companies.
It is important to consider all points and to understand the responsibilities as a contractor and company director - if you do have any questions contact a specialist Contractor accountant to help you.
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