Benefits of contracting through a Ltd. company

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.

Top tips for Interim Managers

Being an Independent Contractor requires a lot of discipline and planning. Here are a few pointers that will assist in ensuring success. 

Follow schedules 

Being your own master can be a double edge sword. Make a schedule and follow it strictly. It will help you finish projects within deadlines. Clients like to deal with people who are punctual. It shows how professional you are. If you have a meeting scheduled with a client, make sure you are on time, if not earlier.

Don’t take on too much

Interims are always on the lookout for work, but that shouldn’t make you say ‘yes’ to every project that comes your way. Only take on projects that cover your specialism where you can add real value. It is better to say ‘no’ than to agree to do something that you are, perhaps, not able to deliver. Be professional; The client will appreciate it.

Invest in Technology

Don’t be slow to invest in tools that will increase your efficiency. It’s probably tax deductible anyway and is an investment in your future success. If some software helps reduce your workload and enhances your productivity, its worth the Mega Bytes it occupies on your laptop. Buy the stuff you need right now. If you purchase for future use, the technology might get outdated by the time the need arises.

Use Social Media

Social media is a great way not only to catch up with old friends but to make business contacts and network. Use this channel to connect with potential clients by showcasing your talent, publishing case studies and get endorsements from past clients. If having a website is too costly, set up a free blog, but make sure to add content at least once a week.

Keep a record of expenses

The majority of your expenses will be tax deductible. For instance, travel expenses, accommodation and subsistence including associated subsistence like meals and laundry etc. Also, rent, computers, software, maintenance of equipment, internet and telephone bills, dining with clients, stationery, newspapers, industry magazines, professional subscriptions. Keep good records of all expenses. 

Don’t undersell or undercut

The interim market is very competitive. In your desperation to obtain work, don’t quote a daily rate that undermines your professional status. If your daily rate seems too low, the client may be sceptical as to your ability to deliver on the assignment. 

Save for a rainy day

As an Interim, your income will be lumpy. You might earn a large sum in one quarter but nothing in the next quarter. Don’t squander money when the going is good. Save as much as you can, so that it acts as a buffer during the slack months.

Adapted for easy reading from an article in the Economic Times – January 2014