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Limited Companies for Freelancers and Contractors

  • Are you a successful freelancer or contractor? 
  • Still paying normal rates of tax through self-assessment?
  • Working through an umbrella company?

It may be time to go limited! You could significantly reduce your tax liability and benefit from other tax breaks by forming your own limited company.


How limited companies work

A limited company separates your work and personal finances in a tax efficient way, if done properly. As owner and director of a limited company, you work as normal, but your company bills the client, and then the company pays you, usually as a combination of salary and dividends. The company does need to pay corporation tax, and if you are a director on PAYE, it also contributes towards your National Insurance.


The secret to setting up a successful limited company that suits the way you work is to get it right from the start! At Heelan Associates, we specialise in setting up brand new limited companies for individuals, sole traders, and SMEs, to minimise the amount of the paid and maximise the benefits. (For more details on forming a limited company, see our New Business Startup page.)


With changes to tax rates and allowances becoming more frequent, it can be hard to keep up with the latest rules and work out if you’ve got the most efficient and effective financial set-up. Heelan Associates will be there to ensure you are always set up to retain as much of your hard earned cash as possible.


Why form a limited company?

There are many advantages to working for your own company which include:

  • Limited liability – should all fail your personal assets are safe
  • It's tax efficient in many circumstances
  • You can access a wide range of tax benefits, including lower taxation on dividends


What is the difference between a limited company and an umbrella company?

Most umbrella companies are in fact limited companies. The difference is that the umbrella company employs you, so you work for them. The umbrella company acts as your employer, and pays you through their PAYE scheme.


This is convenient and easy - but expensive. You are an employee, so don't access the range of tax breaks available through a limited company. You will usually pay an administration fee and/or percentage of your earnings since the umbrella company does your admin. You may even have to pay an exit fee if you leave.


Contrast this with your own limited company set up and administered by Heelan Associates. We'll set you up a fully compliant company with payroll, take care of your invoicing and receipts, make sure returns are submitted on time and prepare full accounts. Yes, we charge a fee for this, but our aim is that our services should pay for themselves in savings achieved, and you'll have the security of your own company behind you. For more details see our Complete Accounting for Companies page.


What is a Personal Service Company (PSC)?

Good question! It's a term you'll find referring to companies that sell the work of an individual and is owned and operated by that same individual. At Heelan Associates, we understand the importance of making sure your contracts and your company status are clearly defined in the light of ‘IR35’ and truly represent the relationship with the client.


Confused? We're not surprised - call us on 023 9224 0040 for a free consultation and we'll guide you through the IR35* maze!


* IR35 rules are designed to re-coop NI and tax from contractors who do not meet the HMRC's definition of 'self employment'.

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Unit 1, Byngs Business Park
Soake Road, Denmead
Waterlooville. Hampshire


02392 240040
02392 240076

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