Limited Company FAQ’s

Is a limited company right for me?

As a contractor you have the opportunity to take home more of your income each month, but it’s important to make the right decision about how you achieve that aim. Amity Accountants specialises in providing individual accountancy, tax advice and administrative services to professional contractors. We will do a free IR35 review.

We will never pressure you into making a decision, because we believe that presenting you with all the facts up front is much more likely to lead to a longer term relationship.

Should I choose a Limited Company or Umbrella Company?

A Limited company is often considered the most prudent option if you are outside of IR35 (although it can also be an option if you are within IR35), as in many cases you will take home a greater proportion of your income than through an umbrella company. This is because you can benefit from the Flat Rate Vat Scheme, lower National Insurance contributions, and the option to claim back tax on a broader range of business expenses. Also draw dividends in the most tax efficient way.

Almost any firm of local accountants can help you to set-up a limited company for a fee, but they will almost certainly not have the specialist knowledge required to ensure you are compliant with specific contractor legislation such as IR35 and MSC.

Many contractors choose to work with an accountancy company because it leaves them with the time to focus on their work and family life, without the need to worry about invoices, tax returns, IR35, professional indemnity and other matters that many think are best left to qualified accountants and administrators.

In order to discover the best solution for you we strongly recommend contacting us for a discussion and an individual quote based on your specific circumstances. We offer a free IR35 status review, which may be useful in your decision-making. Call our team on 02089528989 or email [email protected]

Why set up a Limited Company?

Setting up and running your own limited company, where you become a director and shareholder, is often the most tax efficient way of working and has a number of advantages.

  • Retain complete control over your financial affairs
  • Give your suppliers and clients a sense of confidence in your business.
  • It enables you to expand and create a own name

Contrary to general belief, running your own company is not difficult and, with the assistance of our experienced and knowledgeable team, it is no more challenging than any other form of trading – so by utilising our services you can enjoy the benefits of running your own limited company, without the organisational headaches.

How do I get started?

Call Amity Accountants and we will be happy to guide you through all the steps in setting up the company with companies’ house and HMRC. We will also answer all your questions.

What is IR35?

IR35 legislation was introduced by the government in April 1999 to eliminate the avoidance of tax and National Insurance Contributions (NIC) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise be regarded as an employee of the client for tax and NIC purposes.

What is the Flat Rate VAT Scheme?

The scheme was introduced by HMRC in 2002 to simplify paperwork for small businesses when accounting for VAT. Limited companies that turn over less than £150,000 (excluding VAT) in any financial year are eligible for the scheme.

It means that contractors can charge clients 20% VAT as normal but when they come to reconcile their VAT, they pay HMRC a percentage of turnover, rather than calculating the VAT on all purchases.

Contractors who work working through limited companies and who opt for the flat rate VAT scheme can significantly reduce their administrative burden and, in some cases, even end up with a cash surplus.

How can I get higher take home with the Ltd Company?

  • You can claim a wider range of expenses
  • There is a greater opportunity for tax planning
  • You have access to the Flat Rate VAT scheme
  • Faster payment and administration process

What are my responsibilities?

Directors of limited companies have certain responsibilities, including registering with, and submitting annual accounts to, Companies House along with an annual return updating your company details. We will help to fulfil the obligations.

Your company must have at least one director, whose job is to make sure the company is run in accordance with company law.

Please speak to your personal account manager if you have any questions regarding your obligations or responsibilities as director of your limited company.

Can I pay myself dividends?

Yes, the net profits of a limited company can be distributed to its shareholders in the form of dividends. Dividend income is not subject to National Insurance contributions and will be tax free if you are a basic rate tax-payer.

You will pay 25% income tax on the amount of dividend income received above the basic rate tax threshold.

As owner of your company, it is entirely up to you how you choose to take funds from the business.

What expenses can I claim?

We will provide you with an Expense Claim form and an Expenses Policy to highlight the most common expenses that can be incurred by your business and to ensure expenses are claimed correctly, avoiding any potential personal tax charges.

What insurance will I need?

Comprehensive insurance is a wise investment for any business. Included as part of our popular Plus and Pro services, Amity Accounting is pleased to provide you with the following range:

Employers’ Liability insurance up to £10,000,000

Public Liability insurance up to £5,000,000

Products Liability insurance up to £1,000,000

Professional Indemnity insurance up to £1,000,000

What if I decide to go permanent?

We can assist you in closing your business. Alternatively, you can leave your company dormant in case you return to contracting and we will handle the necessary administration.

If I stop contracting, do I still have to pay?

Unfortunately yes, because our fees are based on a fixed annual amount for the work we undertake for you, which is agreed in advance when you sign-up with us. Rather than take an upfront payment for the year, we break the payment down into 12 monthly instalments.

How do I open a bank account?

We will provide you with all the necessary details to open up your company bank account, unless you already have one. Please contact us for further information.

Do I need to register my company for VAT?

You must register for VAT if your taxable turnover reaches more than £79,000 within 12 months. Our service to you includes your application for VAT registration and submission of your quarterly VAT returns. It may be beneficial to register for VAT even though you have reached the thresholds. Please talk to our qualified Accountants who will advise the best solution.

Will I need to complete a Personal tax return?

Yes, the UK tax year runs from the 6th April to 5th April the following year. We will assist you to complete your Self Assessment Tax return on your behalf under our Gold package

How do I prove my earnings if I want to apply for a mortgage?

We can provide you with the necessary documentation in this respect and indeed put you in touch with specialists who facilitate mortgages for contractors.

Please leave this field empty.

Comments are closed.

  • We provide one of the most attractive umbrella service solutions available in the market…..
    As a contractor or freelancer you have the opportunity to take home more of your income…..
    Many self employed people wish to retain that status for the flexibility and freedom it affords…..
    Amity CIS solution is suitable for Self-employed working in the construction industry…..