Most Limited Company Contractors remunerate themselves through a mix of Dividends, Reimbursed Expenses and PAYE Salary. By minimising salary payments and maximising dividends it is possible to achieve a significant tax advantage over straight payroll solutions.
If you run a Contractor Limited Company you will be able to deduct certain ‘tax deductable’ business expenses from company billings. Contractors working at remote work sites normally incur a good few expenses however care should be taken to comply with HMRC expense claim rules (including Site Based Rules).
If you run your own Contractor Limited Company and the contracts you are working further to are considered to be ‘Outside IR35’ you can take income from the Company in the form of tax efficient Dividends.
Limited Company Contractors have to pay Corporation Tax on all company profits at the Small Business Rate of 20%. Once Corporation Tax has been paid (or provided for) a dividend can be distributed which, when considered versus PAYE, saves significant amounts in Employers National Insurance.
If you’re an experienced, high level IT Contractor working further to a contract outside the Scope of IR35 you may find a Contractor Limited Company a suitable way to increase your net take home pay!