According to Companies House, limited companies are the most popular type of incorporated structure in the UK and the preferred option for many contractors, as opposed to an umbrella alternative. In the UK, a significant percentage of contractors work via their own limited company as it offers many benefits that are both financially and emotionally rewarding.
If you are a UK contractor, here are just 6 reasons why you should consider setting up a limited company today and, if you are not using one, why you should contact us here at Associate Services:
1. Simple to set up
Setting up a limited company is quick and easy to do. You can apply directly via Companies House, or through an intermediary like Associate Services, where set up is free of charge and can be completed on the same day. If you are new to contracting, or you would prefer professional help with the incorporation process, we can do all the leg work whilst you concentrate on your contractor workload.
2. Higher take home pay
One of the main advantages to contracting through a limited company is that you can take home a higher percentage of your income or turnover, typically around 70 – 80 % and some cases more like 83%. When you work so hard, it’s nice to know there are ways you can maximise the rewards. Operating under a limited company gives you the opportunity to keep that extra monthly income without being aggressive in your planning.
3. Claim on a wider range of expenses
Another benefit of setting up a limited company is that you can claim on a wider range of expenses. Again, this helps you to retain more of your income which you can use to treat yourself to a well-earned break. We can help you to determine the business expenses you’re allowed to claim so that you’re not paying more tax than necessary.
4. Control of your Business
Setting up a limited company means that you retain control over your financial affairs and also the day-to-day running of your business, which appeals to many contractors or self-employed individuals. As the Director, you will have responsibility for running the company and this allows you to have complete oversight on your income and expenditure whilst considering all tax planning opportunities that are based on expanding on standard accounting principles.
5. Gives you more credibility
Some companies prefer not to deal with non-limited business and so they avoid sole-traders or umbrella company formations. Often operating as a limited company will give suppliers and customer more confidence in your personal and professional ability to carry out the work efficiently and with the likes of engaging with various recruitment agencies means you don’t have to be concerned over ‘Preferred Suppliers Lists’
6. Opportunity for tax planning
Setting up a limited company provides many more opportunities for tax planning, allowing you to be proactive when it comes to how much tax to pay. We all want to reduce the amount of tax we pay on our hard-earned cash and the ability to manage our tax affairs remains a key reason for contracting through a limited company.
Setting up a limited company is much more financially rewarding compared with working through an umbrella company. However, it requires a great deal of administration to meet regulatory requirements and a thorough understanding of how to attain all the financial advantages available.
Keith Williams - eProfile & Life Blog 