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Key Facts Limited Company Contractor

When you decide to work on a contract assignment, you can either work through an umbrella company or become a limited company contractor.
For certain assignments, as advised by your specialist recruitment consultant, it may be advantageous forming a limited company.
In this case one contract is made between the client company and the recruitment agency, and another between the recruitment agency and the contractors’ own limited company.

Advantages of using a limited company for contract assignments:

You will bring home a higher salary as you would through an umbrella company. You would also claim for company related expenses. You can draw some of your funds as dividends rather than being paid a full salary, so your overall tax burden is reduced.

Disadvantages of using a limited company for contract assignments:

Although it may be the most tax-efficient way to work, there are many downsides to consider. Setting up a limited company comes with legal obligations.

As the director and shareholder of a limited company you will have to submit your details to Companies House making them publicly available. There will be more administrative work you will have to take into consideration and it will be your responsibility to ensure all of your company paperwork and admin is taken care of in a compliant manner.

It is extremely important that you work out your status with IR35 https://www.gov.uk/guidance/understanding-off-payroll-working-ir35 to avoid any unnecessary investigation or fines.


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