We are here to help you

As part of our all-inclusive service we provide you with unlimited telephone and email support during the year.

We have also produced this FAQs guide covering some of the most common questions we are asked.

You will now invoice your agency or client from your Limited Company and they will pay directly to the business bank account however it is important to understand that the business bank account should not be treated like another personal bank account.  At your initial meeting we will advise on the best way to draw money from the Limited Company bank account to your personal bank account.

3 ways to pay yourself

There are normally 3 payments you will make from the business bank account to your personal bank account on a monthly basis.  These are:

1. Salary/wages
At your initial meeting we will have discussed a salary to pay yourself from your Limited Company.  Shortly after we will send you a monthly payment schedule which shows how much you need to pay simply log in to your business bank account and make an online transfer to your personal bank account for that amount.

2. Dividends
Also at the initial meeting we will have discussed the main method of paying yourself from the Limited Company. This again is simply a transfer from the business bank account to your personal bank account. This should be done as a separate transaction to the salary but can be done at the same time or any time you want.  Most contractors find it easiest to pay the dividends at regular monthly amounts.  It is important to remember that dividends can only be paid out of the after-tax profits of the Company, so ensure you have left enough in the bank account to pay your VAT,  PAYE and Corporation Tax in the future.

3. Expenses claim
It is likely that you will have paid for some business expenses personally e.g. you paid cash for your train ticket or bought a new laptop from your personal bank account. As with any other employer, your Limited Company should reimburse you for these expenses. The easiest way to do this is to record the business expenses paid personally and your mileage claim on your monthly spreadsheet, then reimburse yourself the total calculated at the bottom of the sheet. It is best to do this as a monthly payment and reimburse is on the January expenses in February by again simply transferring the amount from the business bank account to your personal account.

If you have a spouse or partner involved in your business then these 3 payments may be made to them also. We will discuss this with you when setting up the Limited Company.

This will be discussed at your initial meeting, however, it is worth stressing again that you should leave some money in the business to pay for upcoming taxes.

There are 2 main things to consider when deciding how much to pay as a dividend:

1. Will the Company have enough money left to pay Tax bills after I have taken a dividend?

Your Limited Company will have to pay Corporation Tax at a rate of 19% of the profits in a year. This is not paid until 9 months after the year end. So you will need to ensure that you leave enough money in the business to pay this when it’s due. In your monthly spreadsheet we have included a “Corporation Tax estimate” and “profit available to take as dividends” calculator. This is only to be used as a guide but if you would like a clearer idea please contact us.

2. Will I have additional personal tax to pay on the dividend?

The first £2,000 in dividends will be tax free. Above this dividends will be taxed at:

  • 7.5% for basic- rate tax payers (below £46,350)
  • 32.5% for higher-rate tax payers (above £46,350 per year)
  • 38.1% for additional-rate tax payers (above £150,000 per year)

The additional tax will be payable annually as part of your Self Assessment Tax Return calculations. This will be due by the 31 January following the end of the tax year.

Your contract will normally show when you are expected to invoice and we will send you an invoice template by email.  You can simply set this up with your Company details and use it to invoice your client or agency.  Please use sequential invoice numbers when raising new invoices so they can be identified and record the details of the invoice on your monthly accounting spreadsheet. Some agencies will operate a “self-billing” arrangement.  This means you will submit your timesheets and the agency will create an invoice on your behalf.

IR35 (also known as intermediaries legislation) was brought in by the Government in 2000 to tackle the growing use of Limited Companies as disguised employment.  An example may be a permanent employee leaving work on a Friday and returning on a Monday morning at the same desk, same job but working through a Limited Company to pay less tax.

Contractors should be aware of IR35 and how it may affect them if they consider their contract to have likenesses to permanent employment e.g. lack of responsibility, of control, employee benefits, etc.

As part of our service we offer IR35 advice and contract reviews to our clients.  So if you would like to know more please contact us.

Unfortunately there is no black and white test of whether your contract falls under IR35 or not, instead

We will apply tests of the three “principles of employment”.  These are: 

Control

How much control do you have over what, when, how and where the services are performed?

Substitution

Is the work personal to you as the worker or could your Limited Company send someone else to work on this project?

Mutuality of obligation

Is the client obliged to offer you work and are you as the worker obliged to accept it?

There are also other factors that should be taken into account when reviewing IR35 status, including:

  • Is the contract for a specific project?
  • Is there financial risk in the contract?
  • Do you provide your own equipment
  • Are you supposed to fit in to the client organisation as an employee? e.g. staff parties, use of staff canteen, staff training etc.

The answer for most contractors is probably not if we are simply looking at the tax liabilities involved.

A better option is generally to claim a mileage allowance from the company for using your personal car for business travel.  This is currently at a rate of 45 pence per mile up to 10,000 miles per year (6 April to 5 April) and 25 pence per mile thereafter.  You can also claim for cycling to work or using a motorcycle.

Yes, you do need to set up a separate business bank account however we can take care of this for you.  We can arrange for a bank account to be set up with Metro Bank (part of Prudential).  A major benefit of setting up an account with Metro Bank is we have negotiated free business banking for our clients and we also have read only access to your account so you do not need to send us bank statements each month.

We will discuss this with you at your initial meeting and have also produced a handy guide to typical contractor expenses which will be sent through to you. Click here to read.
In some situations it can be very beneficial to bring a spouse into the business as a shareholder, employee or both.  If your spouse has an income of less than £40,000 per year then contact us to discuss how this can work in your business.

Professional Indemnity, Employers Liability and Public Liability Insurances are normally a good idea and for most contractors and also contractual requirement imposed by their agency or client.

We provide £13m of cover as part of packages 2 and 3.  For more details please see here.

We do not offer investment advice however have teamed up with Taylored Financial Planning to provide advice on:

  • Pensions
  • Mortgages
  • Investments
  • Life assurance and critical illness cover
  • Income protection
  • Estate planning and wills

Contact them on 01962 826870 to discuss further or tayloredgroup.co.uk

We are a firm of accountants specialising in contractors and freelancers and our service includes:

  • Unlimited telephone and email support
  • Company incorporation
  • Accounts preparation and submission to HMRC and Companies House
  • Corporation Tax Return preparation and submission
  • Payroll
  • Bookkeeping services
  • VAT returns
  • Annual Return
  • IR35 Reviews and advice
  • Management of all HMRC correspondence
  • Company Secretarial services
  • Registered office address
  • Self Assessment Tax Returns
  • Income and mortgage references

In addition, either in house or through our trusted directors we offer:

  • Management Accounts (to show you how the business is doing, what are the current tax liabilities during the year and future tax estimates)
  • Tax Investigation Cover (to cover the cost of accountancy fees in the event of an HMRC enquiry)
  • Dividend documentation support
  • Financial and Investment advice (mortgages, insurance, investments and pensions)
  • Inheritance Tax planning
  • Professional Indemnity insurance
  • Business advice and consultancy
  • Accounting system set up
  • Online bookkeeping systems
  • Non-contractor accounts
We are very proud that the majority of our new clients come from existing and past client referrals based on the great service provided.  If you know a contractor that would benefit from our service then please pass on our details.

Speak to one of our Directors on 01962 867550

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