What are the differences?
Many contractors are confused about their trading status, (are they self-employed or not?) so at A4C we decided to explain the differences, alongside the introduction of the new A4C Contractor Options Guide.
Someone who is self-employed is indistinguishable from their business. They need to keep accounting records (detailing income, expenses and profit) but have no requirement to file statutory accounts. Instead they must simply file a Self Assessment Tax Return each year and pay the tax and NI owed, from trading activity and other sources of income.
Limited Company Contractor
A limited company is a separate legal entity. It has a requirement to submit statutory accounts each year to HMRC and Companies House and will need to file a Company Tax Return and pay Corporation Tax on its profits. A contractor who trades through a limited company is often the sole employee and shareholder.
Operating through a limited company has greater responsibility. It also incurs higher costs, by way of increased accountancy fees and insurance, however is usually the more tax efficient option, saving you money in the long run.
Can you choose how to trade?
Yes of course the decision is yours. However if you undertake contracts via recruitment agencies they will refuse to work with you unless you have a limited company, due to the strict regulations associated with their industry sector.
Do you need more information?
At A4C we have produced a FREE guide to running a limited company, to request your copy email firstname.lastname@example.org or call us today on:
01737 652 852