How to set up a Limited Company
Setting up a limited company is the most tax-efficient way of structuring your contractor business. With a seamless initial set-up service and a skilled team that can provide careful, on-going management of your limited company’s finances, Tax Agility can assist your limited company for a competitive set monthly fee with no hidden charges.
On this page, we outline the legal requirements that need to be met, and summarise the steps you’ll need to consider, which we can assist you with when setting up your limited company.
STEP 1 – Appoint and meet with your accountant
Seeking the right advice is always the best first step. At Tax Agility, our team of local specialist contractor accountants can assist and guide you through the process from start to finish, ensuring all points have been considered – from tax planning to take home pay.
We believe it’s essential to start with a face-to-face meeting as this allows us to gauge your needs, understand your business and provide the best solution for you. On an on-going basis, you will have a named individual in the team that will support you and deal specifically with your business; we believe this personal service sets us apart and allows us to serve you in the best possible way.
We charge a competitive fixed monthly fee of £105 and will manage all of your financial administration so you can focus on running your new contracting business.
Please contact us today for a complimentary no obligation meeting to allow us to maximise your tax savings and create the right structure to suit your individual circumstances.
STEP 2 – Open your Limited Company
Before you can start working through your limited company, it needs to be set up and registered with Companies House. There is a number of documents that need to be completed and returned to Companies House; among these is a shareholder’s agreement, a Memorandum of Association and Articles of Association. Our specialist accountants can complete these all on your behalf and have your company set up within a few hours.
As your chosen accountant, we will be able to deal with all correspondence from HMRC and Companies House on your behalf – freeing up your time to focus on your business.
STEP 3 – Open a business bank account
As your limited company will be considered its own legal entity for tax purposes, its finances need to be separate from your own personal funds so opening up a new bank account for the business will be required. We can arrange an immediate appointment for you at our local preferred HSBC branch, where you will be charged a competitive rate, or alternatively, you can choose to set up a business account with your own preferred bank.
STEP 4 – Register for VAT
Once your limited company has been established it may be beneficial for you to be registered for VAT (Value Added Tax). There are two options for registration: either the standard way, where you claim back VAT on items that you purchase through your company, or through the Flat Rate VAT scheme.
Most contractors opt for the Flat Rate scheme as it makes accounting for VAT easier for small businesses. Essentially you will charge your client VAT at 20% but pay back a lower rate to HMRC – which can be as low as 14.5% in some sectors (depending on your industry) and can represent a substantial saving.
We can advise you on the most suitable option based on your individual circumstances, and your dedicated accountant is able to apply for VAT registration on your behalf so that you can benefit from these savings.
STEP 5 – Register for PAYE
It is a requirement of all directors of limited companies to register for PAYE in order to draw a salary from the company. The amount you pay yourself will be determined by your individual circumstances and will be a combination of salary and dividend payments – we can assist you with balancing the weight of the two and advise on the best practice for setting the levels to suit your individual circumstances.
You will need to pay any PAYE or National Insurance Contributions to HMRC each month, administer a monthly payroll and prepare and submit monthly payslips and year-end returns. We can manage this all on your behalf as part of our comprehensive fixed fee service.
STEP 6 – Organise Professional Indemnity Insurance
Before you begin any agreed contract work, it is advisable to arrange professional indemnity insurance in order to protect yourself from any claims of negligence, loss of data or documents, or unintentional breaches of intellectual property. The level of PI cover is dependent on the size of your operation and the circumstances of your business, and we can provide introductions, recommend suitable independent advisors and work together with them to make sure you receive the best products and advice for you and your business.
STEP 7 – Invoicing your Clients and Record Keeping
Once you have completed the six steps above your limited company will be operational, meaning you are ready to begin work as a contractor and to start invoicing your clients. As part of the on-going management of your business, it is essential that accurate records are kept of all invoices and business expenses in order to ensure that your remuneration, dividend and expense strategy is legal and tax efficient.
Further to this, under the Government’s new Making Tax Digital legislation, as of 1 April 2019 all VAT registered businesses earning above the threshold (£85,000) are required to submit quarterly returns via a digital, cloud accounting platform, like Xero, a compatible MTD software and a gold partner of Tax Agility.
Useful pages for contractors:
- Accountants for contractors
- The benefits of contracting
- Contractor companies explained
- Setting up a limited company
- Limited company management
- Choosing the right contractor accountant
- Setting-up and ongoing accounting packages for contractors
- Tax advice for contractors
- Important dates and deadlines for contractors
- IR35 explained