Limited Company Guidance

FAQs

The main benefit of working as a limited company contractor is the increase in take-home pay. A limited company contractor can take home as much as 85% of their top line income, compared to 60% with PAYE or 70% with an umbrella service.

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There are certain criteria that a contractor has to meet in order to work in this way, the most important being that they shouldn't fall inside IR35. There are also other considerations such as length of contract and pay rate. Our new business consultants will discuss your circumstances in detail and where required carry out an IR35 review of your contract and working practices to make sure they comply with the legislation.

To find out more, see our IR35 guide.

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As you become the director of a limited company you do have certain responsibilities such as deciding how you're going to be paid, whether to register your company for VAT and preparing and filing your statutory documents. If all this seems a little daunting, don't panic - at PayStream you'll have a dedicated accounts team who'll help with all of the above, including preparing draft accounts for you to sign and filing them at Companies House on your behalf.

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Call us for an initial chat about what we can offer you, and if you like what you hear, if you aren’t already set up with your own limited company, it can be up and running in as little as 2 weeks.

For more detailed information on what's involved in the setup process, see our Getting Started guide here.

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Help Guides

Help Videos

The importance of insurance

As a contractor in business on your own account, insurance is an important consideration. If you made an error or mistake in your work, your company would be liable for your actions.

In most cases, your agency or client will insist that you carry insurance as part of your contract and will not let you start the assignment without proving you have adequate cover.

You will not typically be covered by your client’s or agency’s insurance policies.

You need to make sure you have suitable cover in the event that something goes wrong.

At PayStream, we can offer you the main insurances, including:

•Professional indemnity: to cover any negligent acts, errors or omissions arising from your professional services.

•Public liability: to insure your company against any claims made by a third party such as damage done to a client’s property or personal injury you cause to a third party.

•Employer’s liability: as an ‘employee’ of your company, this protects you, and any additional employees that you take on against injuries sustained at work.

•Personal accident: to provide valuable protection for you in the event that you suffer an accident either while on site or while travelling to site, and cannot return to work as a result.

Paystream are able to provide all these insurance requirements through our bronze, silver and gold packages. Please speak to our new business team directly if you have any questions or would like a quote.

PayStream Accounting Services Limited is an Appointed Representative of Jelf Insurance Brokers Limited, which is authorised and regulated by the Financial Services Authority.

Do I need to do a personal tax return?

The rules and regulations on Personal Tax Self Assessment from HM Revenue and Customs can be quite time consuming and complex.

And that's without considering the penalties involved for non submission and submission of incorrect Returns!

There are many reasons why HMRC will require you to complete a Tax Return.

Among these are being or becoming a company director during the tax year, receiving untaxed income such as capital gains, and being in receipt of dividends or savings income during a tax year in excess of £10,000 gross.

In addition a Tax Return will be needed if you have multiple sources of income, and if you have dual residency, or are working abroad.

As part of the service we'll also remind you of all the important self-assessment deadlines.

These include reminders of when and what you must pay, and if you're due a refund, then we'll arrange for HMRC to pay it directly into your bank account.

On top of that we promise to try and explain tax matters in plain English.

Whatever your situation, if you're unsure of your position or believe you should be completing a return, then Paystream can help.

We have an experienced team of Tax Professionals who deal specifically with personal tax, who can advise on what steps you may need to take, if any, to ensure you don’t fall foul of HMRC legislation. ADNFCR-3319-ID-19949590-ADNFCR

Limted company services explained

If you're a contractor who can work outside of IR35, working through your own limited company is by far and away the most tax efficient option for you.

This is often referred to as operating a Personal Services Company or PSC and would see you become the director of the limited company.

By doing this, you can take your income as dividends which aren't subject to National Insurance and also benefit from a lower tax rate than PAYE income.

You can also claim tax relief on a wider range of expenses. The result is higher take home pay than with any other service.

As the director, you have complete control over your company's finances and all for just one monthly fee.

PayStream's My PSC service provides you with all of the accountancy and administrative support you need, including setting up the company, invoicing, tax returns and much more.

So there you have it, hopefully you've now got a better idea about working outside of IR35.

Umbrella Company vs Limited Company - which is right for me?

Contracting gives you plenty of options in terms of how you choose to get paid and pay tax – our top tips could help push you in the right direction.

If you're new to contracting, running a limited company could be daunting, so a good idea could be to use an umbrella company.

They're really simple to join, easy to use and are perfect for short term contracts. Getting paid this way also means you can claim tax relief on any expenses you incur during your contract.

But if you're a contractor already, you might want to consider using a limited company. They are without a doubt the most tax efficient way of working. You can claim more business expenses and take home over 80 per cent of your top line.

Find out more about our limited company services

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