Financial Matters

If you are working through a limited company, you will pay yourself a monthly salary. Those caught by IR35 will pay themselves a 'deemed salary'.

PAYE (Income Tax), Employers and Employees National Insurance will typically be deducted when your accountant processes your payroll.

You will also claim back any expenses you may have incurred from the Company at regular intervals (e.g. stamps, training, PC equipment, etc.). For those caught by IR35, you are allowed to claim a 5% 'expenses allowance'.

If you are working through a limited company and are not affected by the IR35 rules, the bulk of your income will come in the form of dividends which you will withdraw from your company account (at sensible intervals).

At Company yearend (typically 12 months after incorporation), your accountant will prepare your company accounts. You will then be liable to corporation tax on all company profits for the previous 12 months (for example, turnover minus expenses, salary, executive pension, etc.). This is payable 9 months following your year-end.

You will also be liable to pay any personal tax liabilities via the self-assessment process, to include all personal income received and taking into account any 'benefits in kind'. This liability must be met by 31st January each year (for the year ending the previous April). You should always seek advice from a freelancer accountant or professional advisor, especially if your knowledge of taxes is limited.

More on starting up as a freelancer.