As an independent IT contractor, you have several choices as to how you organise your business. Each option poses its own risks and rewards.
Sole Trader, or going it alone |
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Answerable to no one but yourself—and the taxman. You sort out your own insurances, taxes, and administration. The potential earnings are theoretically boundless, but if you're unsure of your contributions to HM Revenue and Customs, you may find yourself not answering your door or telephone, and wearing dark sunglasses when out in public. |
PAYE (Pay As You Earn) via your recruitment agency |
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You're definitely covered, because you pay full tax and national insurance contributions as you earn, and generally do not claim business expenses—even the ones you are entitled to. If you just can't be bothered with your earnings or believe that throwing money at a problem can make it go away, this may be your option. |
Limited Company |
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Appoint a company secretary, hire a good accountant, and organise yourself so you're up on your insurances and can still find time for holidays—perhaps those two days in April next year? Depending on where you fall with IR35, you could be rolling in the pounds or rolling your eyes every time a client proposes a new amendment to your contract. |
Composite Company |
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Security (or ignorance) in numbers. You and your merry band of contractors bill clients through the company and pay yourselves a minimal salary. You reap the majority of your earnings through dividends—which means highly reduced tax and no national insurance. Almost sounds too good to be true, doesn't it? That's what HM Revenue and Customs think, too. They've vowed to investigate composite companies and their members to make certain that everyone is paying their fair share of taxes. And should one of your partners run foul of IR35 or lose a tax case, you're all in it together. |
Umbrella Company |
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A recent link in the evolutionary chain, umbrellas are meant to shield contractors from administrative burdens and taxation worries. They typically issue invoices, collect payments, and calculate your tax and national insurance contributions for you, and then pay the net earnings into your bank account. Unfortunately, some brollies leak. They may insist upon minimum fees or a minimum duration of service, insist that you make changes to your contracts, or not have the tax accountancy qualifications to back up their service claims. Be wary of any company that waves a 'special dispensation' at you as if it were a magic wand, capable of turning every pound spent into a claimable expense. |
Consultant Technologies |
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Like an umbrella company, we keep you from getting flooded with admin. We offer a tax and accounting structure that maximises your earnings and minimises stress. We guarantee IR35 compliance under your existing contracts. We are dedicated to providing our contractor employees with top-notch personal service.
We offer a transparent billing policy and won't whinge if you decide to take your business elsewhere. The people we want working with us are those who recognise that choosing excellence pays for itself—especially if that service increases your profit margins.
We also have a 'special dispensation' from HMRC, but it rests quietly in a manila folder. We prefer to rely upon the expertise of our accounting and taxation advisors to ensure you receive the highest income to which you are legally entitled. Join us, and you will earn more by doing less.
Join the team.
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