A personal service company (PSC) is a limited company through which an individual contractor provides their services to clients, typically as the sole director and shareholder. It is the standard trading structure for UK contractors and is the "intermediary" that the IR35 rules are designed to look through.
Operating through a PSC has real advantages for an outside-IR35 contractor: profit can be extracted as a tax-efficient mix of salary and dividends, retained earnings can be left in the company, and an employer pension contribution is available as the single biggest tax-efficient extraction lever. The company pays corporation tax at 19% on small profits and 25% at the main rate, with marginal relief in between.
The trade-off is responsibility. A single-director PSC cannot claim the Employment Allowance, which shapes the optimal salary level, and the company is a close company, so overdrawn director's loans trigger a s.455 charge. Where an engagement is inside IR35, much of the tax efficiency of the PSC is lost on that income, which is when an umbrella company often becomes the simpler route.