Contractor guides
Practical guides on IR35 status, off-payroll rules, limited company tax, expenses, dividends and pension planning. Written by specialist contractor accountants.
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View articlesLimited Company Tax
Alphabet shares hold where a spouse or civil partner owns an ordinary share carrying full capital, voting and income rights, given outright with nothing coming back to you. They fail where the share is a dividend-only strip, where the shareholder is your minor child, or where waivers manufacture a split the company reserves cannot support.
IR35 Status
An inside IR35 determination attaches to one engagement, not to you, so closing the company is rarely the immediate answer. Keeping it dormant costs very little and preserves the route back to outside work. Closing earns its keep only where reserves are large and no outside pipeline is realistic, and the two year TAAR decides that.
Limited Company Tax
If your company has lent you money that is still outstanding nine months and one day after the year end, it pays a section 455 charge of 35.75% on loans made from 6 April 2026. The money comes back under section 458 once you repay, but the refund is deferred by another full year.
Limited Company Tax
Two routes exist for bringing a spouse into your contractor company, and they are taxed differently. A salary for real work is deductible, worth around £6,000 of household tax on £12,570 of profit, and can unlock the £10,500 Employment Allowance. Shares instead move dividends onto a second set of bands. Most contractor households end up using both.
Limited Company Tax
The winding-up TAAR taxes a capital distribution from your contractor company as an income dividend where four conditions are met. Condition C is the one that catches contractors: carrying on the same or a similar trade within two years of the distribution. That two year clock, not the liquidation route, decides whether capital treatment survives.
MTD and Compliance
Most limited company contractors do not need to change anything about their accountant for Making Tax Digital, because a PSC director on salary and dividends is generally outside the regime. The question is live for sole-trader and side-income contractors, where the honest answer depends on transaction volume and how much penalty exposure you are willing to carry personally. This guide gives a decision framework rather than a sales pitch.
MTD and Compliance
Signing up for Making Tax Digital for Income Tax takes about ten minutes online, but only a contractor with sole trade or property income can sign up at all. Company income drawn as salary and dividends is outside the regime entirely, so a limited company contractor is only ever signed up for the side income. This guide covers the qualifying income test, what you need to hand, the sign-up steps, the agent route, and the quarterly cadence that follows.
MTD and Compliance
There is one authoritative list of software that works with Making Tax Digital for Income Tax, and it is HMRC's own software finder on GOV.UK. Every product on it has passed HMRC's recognition process, and HMRC does not recommend any of them. This guide explains how a contractor running a limited company alongside sole trade or rental income should use that finder, which capabilities actually matter for a mixed income profile, and how MTD software sits next to an existing PSC accounting stack.
MTD and Compliance
Making Tax Digital for Income Tax was first meant to start in 2018 and actually started on 6 April 2026, which is why contractors still search for the next extension. There has not been one since December 2022. The £50,000 phase is live, £30,000 is fixed for 6 April 2027 and £20,000 for 6 April 2028, and the only open-ended deferral left is partnerships. This guide separates the deferrals that happened from the ones contractors assume are still coming, and sets out what a PSC director with side income should do about the two-years-back test.
Umbrella vs Limited Company
Searching for the cheapest umbrella company feels like sensible cost control, but the entire compliant market operates within a margin band of roughly £15 to £30 per week, which means the maximum saving available from chasing the cheapest option is a few hundred pounds a year. Meanwhile the arrangements that look dramatically cheaper, or that promise dramatically higher take-home pay, are almost always tax-avoidance schemes for which HMRC pursues the worker. This guide explains how umbrella margins actually work, why cheapest is the wrong question, and how to run a total-cost comparison that protects both your net pay and your tax position.
Umbrella vs Limited Company
HMRC maintains a live register of tax avoidance schemes and their promoters, which it updates regularly and uses to warn contractors who may have used arrangements now under investigation. This page explains what appears on that list, what a warning or nudge letter from HMRC means in practice, how to check whether your umbrella is implicated, and what steps to take if you have used a scheme, including the settlement route and the Loan Charge context.
Umbrella vs Limited Company
Mini umbrella company (MUC) fraud fragments a temporary workforce across hundreds or thousands of small limited companies so that each one can abuse the Employment Allowance and the VAT Flat Rate Scheme. HMRC has been warning about the model since 2021, a BBC investigation exposed it operating inside high-profile supply chains, and from 6 April 2026 the joint and several liability rules make agencies and end clients directly exposed to the PAYE these structures fail to pay. This guide explains how the fraud works, the Companies House red flags that give it away, who carries the liability, and what to do if you suspect you are being paid through one.
IR35 Status
The off-payroll working rules sit in Chapter 10 of ITEPA 2003 and shift responsibility for IR35 status from the contractor to the end client when that client is medium or large. This hub covers every aspect of the regime: what off-payroll working is, the public and private sector timelines, the small company exemption (with the updated 2025 thresholds), how the Status Determination Statement works, deemed direct payment mechanics, overseas clients, the April 2024 offset, and the self-assessment question about employment income from inside off-payroll engagements.
Umbrella vs Limited Company
An umbrella company employs you under a contract of employment and operates PAYE on your income. That makes you an employee for that engagement, not self-employed. The two statuses are mutually exclusive for the same piece of work. This page explains why the confusion arises, what genuine self-employment looks like, and how hybrid situations work when you run both at once.
Umbrella vs Limited Company
Should you use an umbrella company, stay on agency PAYE, or run a limited company? This page sets out the real advantages and disadvantages of the umbrella route in plain terms, using 2026/27 figures, so you can make the decision with open eyes.
Umbrella vs Limited Company
When you take an inside-IR35 or temporary contract, you are often offered two employed routes: an umbrella company or the agency's own PAYE payroll. Both treat you as an employee and both deduct income tax and National Insurance. But they differ in who employs you, how the employer NIC and margin interact with your rate, holiday pay treatment, pension contributions, continuity of employment across contracts, and the rights and protections you carry. This guide compares the two routes at 2026/27 rates with a worked example at £400 per day.
Umbrella vs Limited Company
Choosing an umbrella and verifying one are different tasks. This page is the verification toolkit: the exact checks that prove an umbrella is operating PAYE correctly rather than merely claiming to. It covers how to read the FCSA and Professional Passport registers, what a SafeRec real-time payslip audit actually proves, how to search HMRC's published list of named tax-avoidance schemes, how to reconcile your own RTI record in the Personal Tax Account, the red flags that override every reassurance, and the practical steps if you discover you are already inside a scheme.
Umbrella vs Limited Company
Thousands of UK contractors use umbrella companies each year, and after the Finance Act 2026 reforms the compliance stakes are higher than ever for workers, agencies and end clients alike. This guide sets out the compliance-led framework for choosing an umbrella: what accreditation means, how to read your Key Information Document, why a 90%-plus take-home promise is a hard warning sign, and how the April 2026 joint and several liability change reshapes agency PSLs.
IR35 Status
Receiving an inside IR35 Status Determination Statement does not mean the matter is closed. Under ITEPA 2003 s.61T, every contractor has a formal right to challenge the determination through the client-led disagreement process. This guide covers the evidence to gather, how to write a compelling representation, what the 45-day process involves, and why blanket determinations are a strong attack line.
Limited Company Tax
Two legal routes exist for closing a solvent contractor company: voluntary strike-off (low-cost, capped at £25,000) and a Members' Voluntary Liquidation (MVL, suited to larger reserves and capital treatment). The right choice turns on reserve size, future contracting plans, and the TAAR's two-year same-trade trap, which can flip what looks like a capital gain into an income distribution.
Contractor Accounting Basics
Judge a contractor accountant fee by the scope behind it, not by the monthly figure. Decide which package shape fits how you work, then confirm in writing whether year-end accounts, payroll, VAT, your self assessment, status support and software sit inside the fee or outside it. Scope gaps, not headline numbers, decide the real cost.
Limited Company Tax
Your headline day rate and your annual take-home are separated by tax, National Insurance, operating costs and, above all, the number of days you actually bill. This guide walks through billable-days realism and the three main contracting routes (outside-IR35 PSC, inside-IR35 and umbrella) so you can build an honest picture of what a day rate is worth.
Expenses and Deductions
Contractor expenses are one of the most misunderstood areas of PSC tax, and the most costly when claimed incorrectly. This guide covers the four rules that determine whether a cost is genuinely deductible, the 24-month workplace trap that catches contractors every year, and why pensions outperform most day-to-day expenses as a tax lever.
Pension and Dividends
Your company can pay up to £60,000 into your pension in 2026/27, plus any unused allowance from the previous three tax years, so up to £240,000 if you contributed nothing and were a scheme member throughout. The taper cuts the allowance only where threshold income also exceeds £200,000, falling to a £10,000 floor.
Pension and Dividends
An employer pension contribution from your company is the single largest tax-efficient extraction route open to a PSC director in 2026/27, beating salary and dividends comfortably. This guide explains the £60,000 annual allowance, the taper for high earners, three-year carry-forward, the money purchase annual allowance trap and why the employer route beats a personal contribution.
Pension and Dividends
Once you know an employer pension contribution is your biggest tax-efficient lever as a PSC director, the next question is which scheme to put it into. This guide explains the three main pension types available to contractors, why SIPPs are a common choice for limited company directors, what factors to weigh when comparing providers, and where the boundary sits between accounting advice and regulated financial advice.
Pension and Dividends
An employer pension contribution from your personal service company is the most tax-efficient extraction route available to a PSC director. It reduces corporation tax, carries no National Insurance on either side, and is not taxed as income when it enters the pension. This page explains the mechanics, the CT saving arithmetic, and why the employer route beats the personal contribution route for most contractors.
MTD and Compliance
Almost every PSC director must file a Self Assessment tax return, even when PAYE has already been deducted from their salary. This guide covers exactly who must file, what income belongs on the return, the key deadlines and the payments-on-account system, and the most common mistakes limited-company contractors make.
Limited Company Tax
Real contractor tax planning is a short list of legitimate levers used in the right order: how you take money out, the pension contribution that beats them all, the expenses you actually qualify for, the timing of declarations, and a clean exit. This guide sets out each lever at 2026/27 rates and draws a hard line under the avoidance schemes that look tempting and end badly.
MTD and Compliance
VAT registration is compulsory once your taxable turnover exceeds £90,000 in any rolling 12 months, but many contractors register voluntarily well below that threshold. This guide covers the compulsory and voluntary tests, what the frozen thresholds mean in practice, and the Making Tax Digital for VAT obligations that apply once you are registered.
Limited Company Tax
Every contractor limited company pays corporation tax before a penny can be extracted as a dividend. Understanding the three-band structure, the 26.5% marginal trap and the two legitimate reducers (salary and pension) keeps more of your day rate in the right hands.
IR35 Status
When a contractor is caught by IR35, PAYE and National Insurance are collected through a deemed employment payment. Exactly how that calculation works depends on whether Chapter 8 or Chapter 10 of ITEPA 2003 applies, and the two regimes operate very differently. This guide sets out the mechanics of each, the key distinctions and what ultimately lands in your personal service company.
Limited Company Tax
A contractor running a personal service company extracts profit through a mix of salary and dividends, and the right balance changed for 2026/27 when dividend rates rose. This guide sets out the salary options, the Employment Allowance fork that decides them, and the dividend planning that follows, without pretending one number fits every company.
Pension and Dividends
Finance Act 2026 raised the ordinary and upper dividend rates from 6 April 2026, pushing the rates contractors face to 10.75%, 35.75% and 39.35% in 2026/27. This guide explains how dividend tax works in practice, how dividends sit on top of your other income, and the planning options available to keep the bill as low as legally possible.
IR35 Status
Under the off-payroll working rules, the fee-payer (not the end client) operates PAYE and National Insurance on inside-IR35 payments. But that liability can shift to the end client when an SDS is invalid, reasonable care was not taken, or debt-transfer provisions are triggered. This guide explains who the fee-payer is, when liability moves up the chain, and what the 2024 set-off rules mean for the cost of getting it wrong.
Contractor Accounting Basics
Incorporation takes a day. The month after it carries the deadlines that matter: tell HMRC the company is active within three months, register for PAYE before the first payday, settle the VAT question before the first invoice, and open the business bank account first because it is the slowest step of all.
MTD and Compliance
The VAT Flat Rate Scheme sounds appealing, pay a single percentage of your VAT-inclusive turnover and keep the difference. For most labour-only contractors, the 16.5% limited-cost trader rate closes that gap almost entirely. This guide explains the registration thresholds, how the limited-cost test works each period, and when the FRS is genuinely worth using.
Expenses and Deductions
Running a PSC from home creates real allowable expenses, but the rules are stricter than most contractors assume. This guide covers the wholly-and-exclusively test, the two main methods for calculating the deductible amount, what documentation HMRC expects, and the boundaries that separate a clean claim from a risky one.
Contractor Accounting Basics
The wrong accountant costs a contractor far more than a cheaper monthly fee. A genuine contractor specialist handles IR35 status support, extraction planning around the 2026/27 rate changes, pension strategy and the Managed Service Company risk boundary that a general practice accountant will not even know exists. This guide sets out exactly what to test before you sign.
Contractor Accounting Basics
Switching contractor accountant is simpler than most contractors expect, but the timing and preparation determine whether the handover is clean or creates gaps. This guide covers the professional clearance process, what to gather before you switch, how year-end timing affects the move, and the questions a specialist firm asks that a generalist never does.
IR35 Status
HMRC's Check Employment Status for Tax (CEST) tool, updated 30 April 2025, is the most widely used first screen for IR35 status. Used carefully and honestly, it generates an audit document HMRC will stand behind. But a CEST result is not a guarantee, and its treatment of mutuality of obligation is narrower than the case law, so contractors and clients who rely on it alone are taking a risk.
IR35 Status
An inside IR35 day rate is not the money you keep. This guide works through the exact deduction order in 2026/27, from the assignment rate through employer NIC, employee NIC and income tax, with two full day-rate examples. It explains why the employer's costs come out of your rate, not your client's pocket.
IR35 Status
Being caught inside IR35 does not just change your tax bill; it changes the entire mechanism by which you are taxed, from deemed payment calculations to employer National Insurance landing on your assignment rate. This guide explains exactly what happens to your income, what you can still claim, and whether staying in your PSC or moving to an umbrella is the right call.
IR35 Status
A contract that reads well on paper can still put you inside IR35 if the working practices tell a different story. This guide walks through every clause that matters: substitution, control, mutuality of obligation, financial risk and the steps to take once you have a clean written contract.
IR35 Status
Chapter 10 of the off-payroll working rules does not apply where the end client is a small company. Thresholds were raised in 2026 but the timing lag means most contractors should still assume their medium clients are in scope for 2026/27. This guide covers the current test, the two consecutive years rule, and the 6 April 2027 exit timing.
IR35 Status
Every IR35 determination turns on three tests drawn from a 1968 court case and refined by a string of appellate decisions running up to the Supreme Court in 2024. This guide explains the framework structure, gives the control test the detailed treatment it deserves, and shows where the substitution and mutuality tests fit in.
Umbrella vs Limited Company
A limited company (PSC) and an umbrella company are the two main structural routes for UK contractors, but the right choice depends on your IR35 status, the mix of your work, and your tolerance for compliance overhead. Neither is universally superior.
Expenses and Deductions
From 6 April 2026 the approved mileage rate for the first 10,000 business miles rose to 55p per mile, up from 45p. For limited-company contractors the change means meaningfully larger tax-free reimbursements and a corresponding reduction in taxable profit, provided the journey qualifies as business mileage rather than ordinary commuting. This page explains the rules in full, including the permanent-workplace trap and the separate restriction that applies to inside-IR35 engagements.
Contractor Accounting Basics
The Managed Service Company legislation in Chapter 9 ITEPA 2003 is a separate and often-overlooked risk for limited company contractors. Unlike IR35, it does not require a status test to apply, and unpaid tax can become a personal debt. This guide explains how the legislation works, what makes a company an MSC, and why the accountancy carve-out in section 61B(3) matters when choosing how you run your PSC.
MTD and Compliance
Making Tax Digital for Income Tax mandates digital records and quarterly updates for sole traders and landlords, phased in from 6 April 2026. The single fact most contractors get wrong is that a limited company director on salary and dividends is generally outside it, while a sole-trader freelancer over the income threshold is in. This guide sets out exactly who is caught, when, and what to do.
IR35 Status
Mutuality of obligation is the most misunderstood of the three IR35 status tests. The Supreme Court's 2024 ruling in PGMOL confirmed that MOO can exist within a single engagement and that finding it does not, by itself, settle status in favour of employment. This guide explains what MOO actually requires, how PGMOL changed the analysis, and why the CEST tool's treatment of MOO is narrower than the case law.
IR35 Status
The off-payroll working rules (Chapter 10 ITEPA 2003) shift responsibility for IR35 status from the contractor to the end client when the client is medium or large. This guide explains how the Status Determination Statement works, who operates PAYE, the debt-transfer chain, and the April 2024 set-off that protects contractors from double taxation.
IR35 Status
Operating outside IR35 through a limited company lets contractors extract income more efficiently than employment, but the arithmetic is specific. This page works through the full outside-IR35 money flow, from day rate to net take-home, using 2026/27 corporation tax and dividend rates.
IR35 Status
Outside-IR35 status means you are classified as self-employed, keeping the tax-efficient benefits of a PSC and avoiding the deemed payment. Protecting that status requires evidence beyond contract wording, working practices that reflect genuine self-employment, and a clear understanding of what the client will assess.
Limited Company Tax
Running your contracting business through a limited company gives you real tax flexibility, but the rules changed significantly from April 2026. This guide covers every layer of the tax picture for a PSC director: corporation tax bands and marginal relief, the 2026/27 dividend rates (raised by Finance Act 2026), NIC for a director's payroll, how to structure your salary and dividends correctly, and what happens when a director's loan goes overdrawn.
IR35 Status
Under the off-payroll working rules, a medium or large client must issue a Status Determination Statement for each engagement, reached with reasonable care and passed down the chain. This guide explains what makes an SDS valid, what happens when a client gets it wrong, and how to use the 45-day disagreement process to challenge a determination you think is incorrect.
Contractor Accounting Basics
Going limited is a sequence of practical decisions, not a single form. This guide walks through whether a personal service company is right for you, how to incorporate at Companies House, which tax registrations you need, and the financial setup that follows, with 2026/27 figures throughout.
IR35 Status
A substitution clause in your contract is one of the strongest outside-IR35 indicators, but only if it is genuine, unfettered, and reflected in how the engagement actually runs. This guide explains what tribunals look for, how a sham clause can make things worse, and what you need to do to make substitution work for you.
Umbrella vs Limited Company
An umbrella company is the right base for many contractors, particularly those on inside-IR35 engagements. But once your work mix changes, staying umbrella can cost you thousands. This guide explains the specific triggers that make the switch to a personal service company (PSC) worth considering, the practical steps involved, and the circumstances where umbrella remains the smarter call.
Expenses and Deductions
Three expense categories that confuse even experienced contractors: training costs, professional body subscriptions, and equipment purchases through a PSC. The rules are more nuanced than a simple yes/no, and getting them wrong risks a disallowed deduction or a personal-benefit charge. This guide sets out the wholly-and-exclusively test, the training distinction HMRC draws, the subscription rules, and how capital allowances apply to equipment in 2026/27.
Expenses and Deductions
Inside-IR35 engagements treat the client site as a permanent workplace, so home-to-client travel is generally not deductible. This is one of the most costly differences between inside and outside status. Outside-IR35 contractors can claim travel under the temporary workplace rules and the 24-month/40% test; inside-IR35 workers keep far fewer options.
Umbrella vs Limited Company
An umbrella payslip looks nothing like a standard employment payslip because the deductions start above your gross pay, at the assignment rate. This guide walks through every line from assignment rate to net pay, explains how to run the reconciliation yourself, and flags the specific numbers that signal skimming or non-compliance.
Umbrella vs Limited Company
An umbrella company employs you under an overarching contract of employment, operates PAYE and NIC on your assignment income, and hands you a net salary. This page explains the full deduction chain from assignment rate to take-home, your statutory rights including the Key Information Document, and exactly what the April 2026 joint-and-several-liability reform means for you and the agency above you.
Umbrella vs Limited Company
Holiday pay from an umbrella company is a statutory entitlement, not a bonus, and how it is funded and paid matters enormously to your take-home. This guide explains how the assignment-rate model works, what your Key Information Document must show, what changed in April 2026, and the red flags that signal a non-compliant or avoidance-linked umbrella.
MTD and Compliance
The VAT flat rate scheme (FRS) promises simpler bookkeeping and the chance to pocket the spread between the rate you charge and the rate you pay. For most limited-company contractors, however, the 2017 limited-cost-trader rule closed that gap almost entirely. This guide works through the decision: who the FRS can still benefit, who it will cost money, and how voluntary registration fits into the picture.
Contractor Accounting Basics
A contractor accountant is a specialist who works exclusively or primarily with limited-company contractors, umbrella workers and freelancers. Their knowledge of IR35, off-payroll rules and PSC tax planning goes far beyond what a general practice firm offers. This guide explains what they do, how they differ from a generalist accountant, and how to know whether you need one.
IR35 Status
IR35 is the set of UK tax rules that decides whether a contractor working through a limited company is really a disguised employee, and so should pay broadly employment levels of tax and National Insurance. This guide explains what the rules are, how the two regimes differ, the three tests that drive a status decision, and who actually makes that decision for 2026/27.