Now that you’re thinking about taking the leap and becoming your own boss and a contractor you’ll want to know what the best way to set up your business is. Well, maybe there isn’t one best way for everyone – but we’ll give you the information you need to decide which is best for you.
There are 2 ways people usually go about setting up their business – as part of an umbrella (scheme) or a limited company.
You lucky thing
But you are in luck. There are plenty of specialist contractor accountants who exist (we are one of them, but less stuffy!) who can do all of this for you and save you a lot of time, while helping you avoid mistakes and save time.
Usually this is the most tax efficient way of running a business. You’ll pay yourself a salary, usually low enough to stay in your personal allowance and then the rest of your income will be paid to you in the form of dividends. You’ll have to pay less tax on them (7.5% in your basic rate, 32% in higher rate and 38.1% in additional rate). You can see that in your basic rate there’s a tax saving of over 13.5%.
A hassle free and no fuss business model. You (essentially) work for another company or umbrella scheme. So, you avoid a lot of admin. You’ll get more employment rights than a limited company director and if you send your timesheets off correctly you’ll be more likely to get paid accurately and on time.
We are just scratching the surface with this first article so stay tuned for our next post on the downsides of each option and some of the rules you have to know about.