A limited company might be your most tax efficient option if you’re a high earner and contracting for the longer term.
You may be eligible to claim business expenses and, if you pass the IR35 test, you can choose to pay yourself dividends alongside your salary, which reduces your tax burden.
The whole point of contracting is freedom of being your own boss, so we are here to give you the accounting tax and legal advice you need to get started and all the help you need going onwards and upwards.
frequently asked questions
We have grouped the most frequently asked questions to answer your queries. We are constantly updating these based upon your feedback.
what is a PSC?
PSC stands for Personal Service Company, it is also sometimes referred to as a limited company.
what are the benefits of a PSC?
If your assignment is deemed to be outside of IR35, you may be able to pay yourself a small salary and withdraw the remainder of your income as expenses and dividends. This is much more tax efficient than income being taxed as PAYE. You are also in control of when you pay yourself allowing for further tax planning.
what accountancy software does giant use?
We provide you with access to FreeAgent which is user friendly and provides you with all the accounting and financial tools required. Access is via your giant personal portal.
tell me about IR35 tax legislation
what is IR35 and how does IR35 affect my limited company?
IR35 is legislation introduced by HMRC to help determine whether someone works like an employee of a business or as a contractor in business for themselves. It looks at a variety of factors including your contract and working practises.
If you are operating as a genuine business then you are deemed to be outside of IR35 and as a result, you can pay yourself low salary, expenses and dividends which saves you tax and national insurance. If you’re inside IR35 all income is subject to PAYE taxes. Please note if you thought that most of your assignments will be inside IR35 then the umbrella option may be more suitable.
who decides my IR35 status for each assignment?
Your hirer decides your IR35 status, unless they are a non-public small or medium sized company in which case you decide.
dividends and VAT
what are dividends and what are the benefits of them?
A dividend is a profit-share payment made from the post-tax profits of a company, to the shareholders (owners) of the company.
Dividends are generally a more tax efficient method of withdrawing money from your limited company, as they are taxed differently to salary and are not subject to employers national insurance.
do you file my company quarterly VAT Returns to HMRC?
Yes, your giant accountant will prepare your quarterly VAT Returns on your FreeAgent account, and file them online to HMRC and give you the correct instructions on how to make the necessary payments. Prior to submission, we will keep you informed of each stage of this process.
is it compulsory for my company to be VAT registered?
If your company income is over £85,000 per year, it is compulsory for you to be VAT registered however if your company income is below the threshold, it is optional. Your accountant will go through the different VAT options you have for your limited company.
what are the main services giant will provide for me?
can you assist me with opening a business bank account?
You will need to set up a bank account in the name of your limited company. This is because your company is a separate legal entity and your personal and business finances are kept separate from one another. You can choose your own preferred bank, or we can put you in touch with ones that we partner with.
can giant accounts set up a limited company for me?
Yes, giant can set up a limited company for you within 24 hours, you just need to come up with the company name and we will take care of the rest!
do you operate a payroll for me?
Yes, your salary will be run once a month and a payslip will be generated towards the end of each month detailing your net salary and any PAYE liabilities you need to pay to HMRC. The payslips can be found on your company's FreeAgent account which your giant accountant will prepare for you on a monthly basis.
do you prepare the Annual Accounts and Corporation Tax liability at end of the company’s accounting year?
Yes your company’s annual accounts - called ‘statutory accounts’ - are prepared by us from the financial records at the end of your accounting year. Statutory accounts include: a ‘balance sheet’, which shows the value of everything the company owns and is owed or owes on the last day of the financial year; a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year; a director’s report; and notes about the accounts.
can you complete my director’s self-assessment?
As a company director, you will be required to file a personal self-assessment tax return each year, giant will prepare and file this for you. This may incur an additional fee if there is income not related to your limited company.
tell me about invoices and expenses
how I do I raise an invoice?
You can start trading through your company via your FreeAgent account by billing your client for your services on a weekly or monthly basis. An invoice template can be found in your FreeAgent account together with simple instructions on how to create and send an invoice to your client. The knowledge base section in FreeAgent is packed with tutorials and videos that can help you perform these tasks and others.
what expenses can I claim?
If your assignment falls outside of IR35, you may be eligible to claim a large range of business expenses such as business travel, secondary accommodation, subsistence etc.
how is an expense claim made?
You can claim via the accountancy software provided by giant on your online portal and then reimburse the total expenses value to yourself monthly from the funds held in your business bank account.
what about pensions and other miscellaneous questions
how do I contribute to a pension with my limited company?
As a director of your limited company, you have two pension options. You can either chose to contribute to a company pension or a personal pension. We can put you in touch with a financial advisor who can discuss the best option for you and your company based on your circumstances. To find out more, please call Humphries on 0208 390 9055 to speak with one of their Independent Financial Advisors
can I set up a limited company if I’ve been bankrupt?
You may not be able to operate through a limited company or be a director of any other company, if you have been declared bankrupt and your bankruptcy has not been discharged.
can I set up a limited company in a different country?
No, giant can only assist you with setting up a company registered In the UK.
what can I do with my limited company if I am no longer trading through it?
what are my options?
A contract ending has no impact on the limited company, it continues to operate as a business. However, if a contract comes to an end and there are no further contracts in the pipeline, you generally have 3 options:
Dormancy: If you plan to take a short break from freelancing, you may want to consider making your company ‘dormant’. This is a temporary suspension of some services, but the company remains on the Companies House Register as a trading company and all returns still have to be filed. The advantage of putting your company into dormancy is that the company remains there and ready to use when you need it and the company bank account is already up and running.
Striking off: Your second option is to wind the company up by collecting all your debts, paying off all the creditors and taking all the remaining money out of the company by way of salary expenses or dividends. The winding up process includes de-registering for PAYE and VAT and applying to have the company struck off by the registrar of companies. As your accountants we can do this for you. The process usually takes up to 3 months.
Members voluntary liquidation: Finally, your third option is to undertake a member’s voluntary liquidation (MVL). There are significant tax benefits for taking this option.
If your company has a minimum net asset value of £25,000, normally represented by cash, and you meet certain conditions, then it can appoint a liquidator to formally close the company.
Unlike the striking off process under option 2, where any income you take out of the company is subject to income tax, monies distributed under an MVL are subject to capital gains tax and in most cases you can benefit from entrepreneurs relief where the tax rate is only 10%. Tax savings can range from £10,000 through to £35,000 where net assets are above £100,000 in the company. As your accountants we can arrange for an MVL for you.
benefits of giant accounts
- your own qualified accountant and support team
- speedy set up
- IR35 solutions
- 3rd party software
- nearly 30 years of experience
- specialist business insurances
- agreed service levels
- 100% compliance
- access to full payment history
When you operate a limited company through giant accounts, you’re not alone! We’re here for you with expert advice on your working options to help you with your decisions.
We can help you organise your business bank account. And there’s plenty of ongoing support from your accountant and our team of specialists, as well as your 24/7 personal, online, mobile enabled portal.
If you’re new to this kind of independence – freelancing, contracting, self-employment – you’ll soon realise that you have additional responsibilities as a director, but don’t worry as we’re here to help!
As the director, all decisions are yours however, we support and guide you through setting up your business, IR35 assessments, the day-to-day running, VAT returns, salary, expenses, dividends (when outside IR35), personal and company tax returns, and business growth.
IR35 Off-payroll working
The aim of the Off-payroll working legislation is to ensure that if you are truly an independent self-employed contractor, you can benefit from receiving dividends and if not, tax and national insurance must be deducted from your earnings by the party paying you.
It is your hirer who decides if you are 'inside' or 'outside' IR35. This has a significant impact on your net earnings. It is therefore important you make the right decision if you are considering a limited company.
how it works
As the director you make all of the decisions but we support and guide you through setting up your business, IR35 assessments, the day-to-day running, VAT returns, salary, expenses, dividends (when outside IR35), personal and company tax returns, and business growth.
Our speedy set up means company incorporation takes about 5 minutes and can be done over the phone! Everything else will be set up and you will be good to go within 24 hours.
With prices starting from £125 a month, can you afford to wait!