Advantages of limited company contracting
Contracting through a limited company (often referred to as a personal service company – PSC) has plenty of advantages. It is widely considered the most professional and beneficial way to operate as a contractor. But what are the advantages of contracting through a limited company?
Greater take-home pay potential
The most tax-efficient way, and the best way to maximise your pay retention as a contractor is by operating through a limited company (PSC) while being outside IR35 legislation. This is because you can pay yourself with a salary and dividends combination – reducing your tax liability. While this figure will vary due to a number of factors, limited company contractors should expect to retain up to 80% of their income. And, since limited company contracting is such hard work – who can begrudge that?
Chance to claim tax relief on expenses
Any costs that are incurred directly as a result of your work can be put down as business expenses – and you can benefit from tax relief on these costs. This is one of the significant advantages of contracting through a limited company.
Regarded as the most professional set up
From both a client and hirer’s perspective – operating through a limited company probably gives out the most professional image. Some hirers may only deal with limited company contractors, and others may favour contractors with a limited company over sole traders.
Running a limited company isn’t as hard as you might think it is
Sure, there is way more responsibly for limited company contractors than contractors who solely use an umbrella company for their payroll. However, some outstanding contractor accountants out there can help make running a limited company a piece of cake at a reasonable cost. And if you don’t like the idea of using an accountant, there are some ground-breaking pieces of accountancy software in the marketplace that can make your life so much easier. For example, check out FreeAgent.
There are options out there for every limited company contractor. If you want an accountant to assist you with every aspect of running your company – there are multiple packages to choose from. If on the other hand you’d rather have a more hands-on approach and use supporting software – there are some exceptional software solutions too.