Setting yourself up as an IT contractor leads to the question, “Do I use an umbrella company or set up a limited company?”  In our previous blog we looked at the option of the umbrella company.  Here we investigate the option of setting up a limited company.  Is this the right option for you?

IT Contractor Limited Company

A limited company (sometimes called a Personal Service Company or PSC) makes sense if you’re earning more than £15 per hour or are a long-term IT contractor and want to increase your net earnings while having full control over your finances.

Contracting through a limited company is the most tax efficient way of operating. You will be eligible to claim business expenses and providing your contract falls outside IR35 i.e. you’re not deemed to be an employee of the client using a limited company as a disguise, you may draw dividends from the company.

Umbrella company or limited company?

When comparing the Umbrella or Limited company option, many IT contractors decide against starting a limited company because of the day to day administration and the legal requirements all limited companies must comply with. However, there is lots of help available when setting up a limited company and it is a relatively straightforward process.

If you do not want the responsibility, or do not have time for the administration involved, there are services that will invoice your clients, run your monthly payroll, prepare your annual account and corporation tax returns. Alternatively, you can use a specialist contract accountant to help with this.

Therefore, a limited company is a good option if you are dedicated to IT contracting with multiple clients throughout the year and see this as your career choice.

For further information on contracting visit https://www.itcontracting.com/.

If you are looking for a IT contractor to join your team or looking for IT contract work, please call us on 0844 879 4523.