limited company Articles

A cut in dividend allowance will cost some contractors more than £1,000 per year when it takes effect from April.

The allowance on dividends will be cut from £5,000 to £2,000 as the chancellor continues his raid on self-employed finances.

This means that individuals will not pay taxes on the first £2,000 of dividend income, regardless of what non-dividend income they have.

HMRC has launched a new tool designed to help contractors, and those that engage them, decide a worker’s IR35 status.

But with less than a month to go before a fundamental change in the way IR35 rules are applied, some experts have found cause for concern with the Employment Status Indicator tool.

A contractor’s IR35 status is all about whether the contract they are working on should be considered employed or self-employed for tax purposes. The Employment Status Service is supposed to give HMRC’s view of whether a contract is inside or outside IR35.

This will be of particular interest to limited company contractors working in the public sector because, from April, it will be the public sector organisations that decide on IR35 status instead of the individual. 

A new regulation that requires companies to create a ‘Register of People with Significant Control’ (PSC register) comes into force on 6 April 2016.

The changes should not be too strenuous for companies, but it is important that they are aware and fulfil their obligations in line with the new rules.

What is a PSC register?

The PSC register forms part of the reform to UK company law that was introduced in the Small Business, Enterprise and Employment Act 2015.  

If you are a contractor or freelancer the most tax efficient way for you to work is often through your own limited company. This allows you to benefit from the incentives offered for setting-up and running your own business and hence allows you to maximise your earnings after tax.

It also enables you to develop and build your business & brand and potentially in the future employ others.

The downside of this is that there is more responsibility on you as a director of your own limited company and there are statutory requirements re maintaining financial records, preparing and submitting year-end accounts, corporation tax returns, personal tax returns, payroll and managing invoicing & payments.