Contracting for the first time can be an exciting new challenge and adventure in your career. There are advantages to contracting within every industry sector, including greater opportunity for skill development, increased flexibility and financial rewards. As you develop your contracting career, you will find that a wider range of contract work becomes available to you and you will acquire skills and experience working with various clients. In this sense contracting becomes your business.
Contracting is different to permanent employment, as you have the freedom to choose how you will be paid. It’s important for you as a contractor to set up your business so that you remain compliant with tax regulations set out by HM Revenue & Customs (HMRC) whilst also increasing your take home pay as much as possible.
There are a few payroll options to choose for your contractor business, the two main options being to contract via your own limited company or work through an umbrella company.
Working through an umbrella company is the simplest way to be paid. Registering with an umbrella company is fast and straightforward, and once you sign up to an umbrella company you effectively become its employee. Through this payroll option, there is no need up your own business or handle any administration besides submitting timesheets. Your umbrella payroll provider will handle all of your tax obligations including income tax and National Insurance. With this option, you also don’t have to worry about IR35 legislation as it will not apply.
However, umbrella companies are not the most tax efficient and if you have the opportunity, contracting via a limited company could increase your take home pay.
To find out more about Churchill Knight Umbrella and the benefits available to all of our clients, please click here.
Setting up a limited company as a contractor means that you become the director and shareholder of a business. You can pay yourself through a combination of salary and dividends, which are distributed to a business bank account as after-tax profit. Tax rates for dividends are lower and are not subject to National Insurance, which is one reason why you can see a higher take home pay through a limited company.
Limited companies require documents to be filed and paperwork to be done fairly regularly, and if you choose this option you should be able to have a business bank account. However, this option can be very rewarding as clients and agencies tend to see registered businesses as more trustworthy, and there are also more growth opportunities by having your own limited company.
The option that is best for you depends on your contract terms, length, your rate and your industry. If you work in the public sector, an umbrella company may be best option if you are subject to IR35 – on the other hand, if you have a higher rate of pay and will be contracting for a longer period of time a limited company is likely the better option.
We can help you weigh the pros and cons of each option and ultimately provide you with either of the above accountancy services. Contact us today to get started.
To see the Churchill Knight contractor accountancy services, please click here.
Established in 1998, Churchill Knight & Associates Ltd is a specialist accountancy provider for contractors and freelancers. We are based in the UK and do not have any automated call centres or outsourced services. We pride ourselves on successfully helping over 20,000 clients to date, so you know you are in safe hands. When speaking to our team, you will receive expert and tailored advice to help you begin your contracting journey on the right track.
From the beginning, our priorities have always been customer service and compliance. This is why we’re proud to have achieved FCSA accreditation. The FCSA is the UK’s leading professional body and they’re committed to ensuring the supply chain (including contractor accountants and umbrella companies) of temporary workers is compliant and ethical.
Our services for first-time contractors include:
When deciding on a payroll solution, many first time contractors want to know how much money they can take home. Try our take home pay calculator to estimate how much income you can take home at the end of the week or month via a limited company versus an umbrella company.
If you are interested in finding out more about our services, or you would like to discuss your circumstances with one of our experts, please give us a call on 01707 871622, or complete the short form below.
Editable content goes here...
Churchill Knight & Associates Ltd and Churchill Knight Umbrella are proudly accredited by the Freelancer and Contractor Services Association (FCSA). The FCSA is the UK’s leading professional body dedicated to ensuring the supply chain of temporary workers is compliant with HMRC’s rules and regulations. We believe that being an accredited member of the FCSA is the best way to showcase our commitment to compliance within our sector.
Whether you’re using one of our limited company accountancy packages (Churchill Knight & Associates Ltd) or you’re an umbrella company employee (Churchill Knight Umbrella), you can rest assured knowing that you are in the very safest hands.
* Calculator for illustration purposes only and uses assumptions. Limited figures based on 52 weeks, expenses £50 per week, £9,100 salary and accountancy fees included. As of 1st April 2023, there is no longer a single rate of Corporation Tax. The calculator uses assumptions and estimates and is designed to be accurate by individual circumstances will vary. Umbrella figures based on 52 weeks, £15 per week margin and holiday pay paid out. For a more accurate calculation tailored to your requirements, please contact Churchill Knight today by calling 01707 871 622 or contact us here.
