Churchill Knight and Associates Ltd

For most contractors a limited company is the most tax efficient way to legally maximise their take home pay. Being a contractor with a limited company gives you the freedom to manage your own finances, minimise your tax burden and benefit from tax relief.
By setting up a limited company, you can become the director, company shareholder and employee. Therefore, when the company generates a profit, it belongs to the company and you are able to take your income through a combination of dividends and salary. The advantage is that this is the most tax efficient way of paying yourself as a contractor and the best way to maximise your income.

Contracting with an umbrella company is a hassle free way of getting on to a payroll system without the administration and additional responsibilities of running your own business. The agency or client makes a payment to the umbrella company, who do all of the administration for you. The umbrella company will make a payment to you through PAYE (Pay As You Earn) and you will receive a payslip in the same way as you would if you were a permanent employee. The umbrella service will deduct any tax and national insurance from your payslip as well as their service charge. There is no financial advantage over being an employee, but all the invoicing and admin is looked after by the umbrella company.

It is important to note that when you choose an umbrella company, you will not qualify for any other payment structures such as dividends, loans and FX schemes. These are considered to be tax avoidance schemes. You may, however, receive dividend payments if you are using your own limited company.

Completing a self-assessment, otherwise known as a Personal Tax Return, can prove to be a time-consuming and sometimes stressful task. Completing a self-assessment involves organising the relevant paperwork, filling in online forms with 100% accuracy, and submitting everything to HMRC by the 31st January 2017 deadline.
If you've never completed a self-assessment on your own, have recently started contracting, or if you don't understand any aspect of the process, you could risk making a mistake if you attempt to complete it yourself. Furthermore, not submitting your return to HMRC by midnight on 31st January 2017 will result in an instant 100 penalty, with further penalties the longer you wait to file.