An IT contractor has many advantages compared to being a standard PAYE employee. As you’ll see below, the pay is better, the opportunities are growing, and the IT sector is a key player with all temp/contracting hires.
ClearSky Contractor Accountants can help you get the most out of self-employment as a limited company director.
Contracting and the IT sector
The time has never been better to start a contracting career in the IT sector. This is a result of the ongoing uncertain nature of UK, European and wider global markets, as well as an increased need for companies and public sector bodies to gain knowledgeable and transferable skill sets to complement their internal teams.
Furthermore, the continuous onset of new technologies, such as cloud computing, will require capable, agile IT personnel that can develop and up-skill in-house departments faced with a skills gap. Experienced contractors have made and will continue to make their mark as a great resource toward achieving those goals.
When you’re self-employed in IT or within any other sector, contracting as a director of a limited company gives you flexibility in a number of ways.
You can take home more money
Let’s be honest: who’s going to argue with better pay? The data holds especially true for self-employed IT professionals. By way of the CWJobs’ salary search tool, a search on the keyword “IT” shows that contract salaries in the sector average £85,964, whilst permanent salaries average £47,500.
As many limited company contractors in IT already have, ClearSky help clients increase their income. Will contracting help you come out ahead? Try our official IT contracting calculator and see what you could earn.
You have the flexibility to claim a range of expenses
If your assignment is outside of IR35, certain business expenses can be claimed as a limited company contractor. If you travel or eat out while on business, some or all of this expenditure can be claimed back. Even the tools that help you to do your job (an iPad or laptop, for instance) can be bought through your limited company to maximise its profitability.
In short, the flexibility of being able to claim expenses can help make contracting even more lucrative. Because legitimate expense claims can seem like a bit of a minefield, ClearSky combine experience with familiarity of HMRC rules to help you identify what you’re entitled to claim for.
You can realise a more tax efficient way of working
Taking home more money is one thing: reducing your tax obligations in the process (and doing it in a compliant manner) is what makes ClearSky stand out. Paying yourself in a combination of salary and dividends is one way you can do this.
One common strategy is to keep your salary low, then make up for it through paying the difference in tax-efficient dividends. We revealed an example of how to do this in our explanation on how dividends are taxed. A contractor can mix dividends and salary on a personal income of £38,000 as director of a limited company. With the help of an experienced IT contractor accountant, it can lead to a tax obligation of just £1,650.
You can separate business finances from personal
Being a company director as an IT contractor means you can separate your financial liability between personal and business.
If something does go wrong with your limited company, your personal assets (like your house) won’t be at risk. Moreover, limited company contractors are able to obtain a separate credit rating. This comes in handy if you should need to buy capital, and it won’t affect your personal credit.
Trust ClearSky, the leading IT Contractor Accountants
ClearSky are the committed IT contractor accountants that can provide you with expert advice to manage your finances in the most tax-efficient way possible. As a founding member of the Freelancer and Contractor Services Association (FCSA), compliance matters with everything we do. We’ve helped thousands of IT specialists set up and manage their Personal Services Company (a form of Limited company) over the years.
ClearSky are with you all the way in your contracting career, whenever you need us. Because we understand everybody’s unique, we’ll advise you in a manner that serves your personal circumstances best.
Increases in paperwork and responsibility are a big reason why so many rely on our personal accountants. We take the hassle away, so you can get back to your day job in IT. ClearSky offer a variety of fixed fee accounting packages that ease your transition into contracting, all while helping you increase your take home pay.
 Michael Page’s “GLOBAL INSIGHTS: The changing landscape of temporary employment and interim management,“ reveals that amongst all contractors/interim managers, those in tech make up the fourth most popular sector.
 Figures drawn from a search conducted 3rd August 2016.