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New to Contracting

Making the transition from a permanent employee to a contractor has numerous benefits; Flexibility, higher pay-rates and regularly changing work environments. Essentially, you will be your own boss and you will have different options of receiving income from your contract work.

The two most common payment methods for contractors in the UK are:

PAYE Umbrella Company When you join an umbrella company, you become an employee their company. The umbrella company is responsible for invoicing your client/agency for your contract work and paying you your salary. They are responsible for all for deducting and paying all of your tax and NI. As a contractor, you will be able to claim certain tax-free business expenses, which will reduce your taxable income. This is not the most tax-efficient method for contractors and is particularly unsuitable for high-earning contractors.

Limited Company Contracting through your own limited company, is the most tax efficient method of receiving income from your contract work.

As the director and shareholder of your limited company, your income will be a combination of a small salary and dividends.
You will be able to claim a wide range of business expenses, which will be offset against your company income.
The remainder of the income, after your salary, expenses and corporation tax has been deducted, is available for you to withdraw as a dividend.
You will also be able to register for the Flat Rate VAT scheme, which will enable you to keep a percentage of the VAT you charge on invoices to your client.

Call us on now 0208 588 9699 to discuss your requirement. Or fill out our Contact Form or send us an email on info@alvinlawrence.co.uk

Specialist Contractor Accountant - Edgware, Middlesex, London UK