• Tom HareTom Hare, 5 years ago

    As others have already said, nearly all recruitment agencies and larger design agencies require you to operate as a limited company (or an umbrella company but forget that).

    Despite what you often hear, setting up a limited company is actually pretty cheap and easy. If you file the paperwork with Companies House yourself then the fee is £14 IIRC. Even if you decide to do the setting up yourself, get a recommendation for a local accountant. They can help you with the general administration side of the business like book-keeping and tax planning as well as doing your accounts at the end of the year.

    Numbers wise; as a limited company, your NI contributions are very low (nominal) and corporation tax (up to £300,000) is 20% (going down to 18% by 2020) which compares favourably to 20% income tax plus 12% NI contribution as an employee or sole trader. It's worth noting that in the Budget last week, basic rate tax on dividends was upped from 0% to 7.5% hitting freelancers operating as a limited company in the pocket hard (several £k pa) but it's still advantageous to operate as a limited company in additional to the requirement from many agencies listed above.

    2 points