Contractors could save money setting up a limited company

Setting up a limited company through a contractor accountant could help to increase the take home pay of many contractors.  Many contractors will use Umbrella Companies due to the relative ease of use and to ensure that they are not hit by IR35 legislation. 

Research conducted by UC Finance, suggests that of the estimated 200,000 contractors currently working through an Umbrella Company, 50% could be losing up to 11% of their annual earnings by doing so. The firm calculates that a freelancer earning £350 a day could save £10,000 – including all costs – by setting themselves up as a one man limited company.

“Freelancers and contractors across the UK are losing significant sums of money because they’ve been sold or ushered into taking an option that simply isn’t the best solution for them. Some will have been encouraged into following the Umbrella Company route by their recruitment agency and others might have been scared into it by the threat of falling foul of IR35 or delayed invoice payments, but either way up to 100,000 people today are locked into a situation where they’re paying seriously over the odds,” said Alasdair McGill, CEO at UC Finance.

UC Finance Managing Director Joanna Holloway commented: “If their contract is IR35 compliant, any freelancer working for more than £150 a day could find that switching to limited company status may well offer considerable financial benefits”.

To understand how to potentially save money as a contractor, please speak to an accountant from our Contractor Accountant Directory.