Limited Company Contracting
Many contractors contract via limited companies as this is the most tax-efficient way to operate, especially if you are not caught by the IR35 rules.
Advantages of contracting through a limited company
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Contracting via a limited company is more tax efficient than working via an umbrella company. Limited company contractors typically take a small salary (minimising PAYE and NIC liabilities), and withdraw the remainder of their income in the form of dividends. NICs are not payable on company dividends.
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If caught by IR35, the benefits of incorporation are reduced, but you may still benefit from joining the flat rate VAT scheme and using the 5% expenses allowance. You will need to check your eligibility with your accountant.
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Having a company will be advantageous if you have other business interests and wish to present a ‘professional’ image of your enterprise.
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Your personal liability as a director is limited, as the name suggests; if things go wrong. One exception is if you are asked to personally guarantee a bank loan to the company.
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As a director, you are in complete control of all company affairs, both financial and administrative.
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You can create different share classes, which can be useful for tax-planning purposes, to attract investors (if you diversify your business), or to divide ownership between a number of people.
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Limited company owners can control the way they remunerate themselves. You can choose the optimum split between salary and dividends, and decide when to draw income from the company.
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As a limited company is a legal entity in its own right, it can be sold or passed on to future generations with ease.
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If you sell your company (however unlikely for the typical contractor) and have accumulated funds within it, you may be able to benefit from the Entrepreneurs’ Relief scheme, via which you pay a mere 10% in CGT on share sale proceeds if you have owned the shares for a year or more.
Going Limited with Zonet - how does it work?
Choose contracting
Typically, contracting increases the rates that you earn, as the employer costs associated with permanent staff require them to pay holidays, sick pay, and the employer's National Insurance.
Engage Zonet
Trading as a limited company involves a lot of paperwork and administration. Using Zonet will ensure that all of this is taken care of for you.
There are a number of forms to sign and complete in the early setup stages, many are online meaning that they can be completed easily in your own time.
Start Trading
Once your company has been established and the paperwork completed, you will need to inform us of business expenses incurred via the online expense form.
Get Paid
Your money will be sent in accordance with the pay frequency that has been arranged with your client or agency. Deductions will be made for tax, national insurance, and any insurance that you have selected.
Complete Documentation
We can do most things on your behalf, however, from time to time we will need you to sign documents. Its imperative that these are done in a timely manner to avoid penalities
