Employment Status

Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.

Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.

Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.

The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]

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Limited Company Business Bank Account

Limited Company Business Bank Account

Contractors, you need 2 Bank accounts:

You have to keep your limited company money completely separate from your personal money, that's why you need two bank accounts; one for your limited company and one for your personal money.

There are different laws on different bank accounts. One law for your limited company bank account and another law for personal bank accounts.

Because of this your bank won't let you cross-over between the two accounts. You cannot use your personal bank account for business purposes.

What Bank

Don't automatically default to the bank that holds your personal account. It may seem the easiest way to sort out in the short-run, but if you're a career contractor you need to make an objective business decision.

You should consider what your limited company needs most of all. The differences in business banking range from a period of free banking through to on-going personal support.

Factors to Figure

  1. Cost of day-to-day current account banking
  2. Named and dedicated account manager
  3. Free software
  4. Online and or offline access
  5. Text alerts
  6. Inter Bank arrangements
  7. Cost of automated transactions
  8. Free business advice (not just banking matters)
  9. Company plastic
  10. Overdraft facilities

Open Sesame

Having picked the bank that suits your limited company the best, you will need to prove your identity in the banks preferred way. This is a legal requirement and down to legislation designed to fight terrorism.

Your bank will want you to provide them with some documentation as follows:

  1. Your limited company Incorporation certificate
  2. A bill that contains your address (eg telephone or gas bill)
  3. Passport or driving license

It can take up to a week before your limited company bank account is set-up. As soon as the business account is open let your recruitment agency and contractor accountant know the details as requested.

Remember: keep your personal and business bank accounts completely separate from each other - this is very important.

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HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.