Contracting through a Limited Company

Top tips for contracting through a limited company

Company Formation

The first step in any Limited Company – but you only have to do it once! In practice, this is a hands-off process that is mostly handled by your accountant. Your accountant will incorporate the company and register it for PAYE, Corporation Tax and VAT. You will need to provide identification, a company name and a UK registered address. You will also need to set up a business bank account – more on that here.

Invoicing your agency or client

Once you have taken on a contract, you will need to remember to invoice your client in order to get paid. Your invoice will need to contain your company name, company details, VAT number, invoice date, client name and details of the products/services you have provided. You can create an invoice template to speed this process up. Invoicing is generally either weekly or monthly, as agreed with the client. If you use business management software like FreeAgent – provided free to all Dolan Accountancy clients – then you can handle this online with just a few clicks.

Keep track of your business expenses

You should keep a record of all allowable business expenses, including receipts and supporting evidence. It is helpful to keep all business spending on your business bank card – this makes reconciling expenses far easier. If you use bookkeeping software, make sure to log your expenses at least once a month – you will save yourself a major headache at the end of each VAT quarter and your accountant will thank you too! For more information on allowable expenses, check out our detailed contractor expenses guide.

Decide how and when you’d like to be paid

Drawing money from a Limited Company needs to be done with a little care, to ensure you are taking it in the most tax efficient manner. Speak to your accountant to decide the salary you would like to take and when you would like to take dividends. You will often agree this at the start of the company’s lifetime and pay yourself without much additional input, but if you ever need to draw additional money or set more aside, just give your accountant a call.

Provide any required information to your accountant by the deadlines

Your business is required to submit annual accounts and quarterly VAT returns. Your accountant will take care of these for you, but they will need information to do so. Ensuring that everything is up-to-date will ensure you don’t miss any deadlines or incur late penalties and will also make your accountant’s life easier – which we are all for!

As you can see, the day-to-day running of a Limited Company isn’t particular stressful – that is the value of a contractor accountant! The administration is only a challenge if you let it pile up, so if you take twenty minutes a month to keep on top of everything, you will find it a breeze and take home more than you would though an Umbrella Company.

A good accountant is worth their weight in gold. For more information on contracting, or to set up a Limited Company with Dolan Accountancy, give one of our specialist contractor accountants a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com.