Accountants for Contractors & Freelancers in Edinburgh & Glasgow

Contracting and freelancing offer the best of both worlds - the freedom of running your own business combined with the relative security of short to medium term contracts. But with that freedom comes the same financial responsibilities as any other small business owner, plus a few that are specific to the way contractors work.

IR35, the VAT flat rate scheme, tax-efficient extraction of funds, the right business structure - these are areas where getting the right advice from the start makes a genuine difference to what you actually take home. At Facts & Figures, we work with contractors and freelancers across Edinburgh, Glasgow, and Scotland, helping them get set up correctly, stay compliant, and make the most of the structure they are operating through.

Getting the structure right

The first decision most new contractors face is how to operate - as a sole trader or through a limited company. For many contractors, particularly those on higher day rates, a limited company is the more tax-efficient route. But it comes with additional compliance obligations, and the right answer depends on your specific circumstances, your day rate, the nature of your contracts, and your IR35 position.

We work through this with every new contractor client before recommending anything - because getting the structure right from the start is far easier than changing it later.

IR35 - what every contractor needs to understand

IR35 is the area that causes the most uncertainty for contractors, and understandably so. The rules are complex, they have changed significantly in recent years, and the consequences of getting it wrong can be costly.

In simple terms, IR35 exists to prevent contractors from working in what is effectively an employed capacity while being paid as if they were a business - thereby avoiding the tax and National Insurance that an employee would pay. If HMRC determines that your contract falls inside IR35, your income from that contract will be treated as employment income and taxed accordingly.

The key factors HMRC looks at include:

  • Substitution - can you send someone else to do the work in your place?

  • Control - does the client control how, when, and where you work?

  • Mutuality of obligation - is there an expectation of ongoing work on both sides?

Since April 2021, responsibility for determining IR35 status on contracts with medium and large private sector clients has shifted to the end client rather than the contractor. However, for contracts with small companies, the contractor remains responsible for their own IR35 assessment.

We help contractors understand their IR35 position, review contracts where there is uncertainty, and make sure their working practices support an outside IR35 determination where that is the correct position.

Tax-efficient extraction of funds

For contractors operating through a limited company, how you extract money from the business has a significant impact on your overall tax position. The most common approach is a combination of a low salary - typically set at or around the National Insurance threshold - and dividends from the company's profits. This is more tax-efficient than taking a higher salary because dividends are taxed at lower rates and are not subject to National Insurance.

The optimal salary and dividend combination depends on your personal circumstances and changes as tax rates and allowances change. We review this with our contractor clients regularly rather than setting it once and leaving it.

Beyond salary and dividends, pension contributions through the company are often the most efficient way to build long-term wealth - employer contributions reduce your corporation tax bill and are not subject to the dividend tax rates that apply to personal drawings.

The VAT Flat Rate Scheme

If your contracting business is VAT registered and your turnover is below £150,000, the VAT Flat Rate Scheme may simplify your VAT accounting and in some cases reduce the amount of VAT you pay to HMRC. Under the flat rate scheme, instead of accounting for VAT on every transaction, you pay a fixed percentage of your gross turnover - the percentage depends on your trade sector.

It is not always the most beneficial option - particularly since the introduction of the limited cost trader rate - but it is worth reviewing for every contractor client. We will work out whether it makes sense for your situation and advise accordingly.

What we cover for contractors and freelancers

  • Company setup and structure advice - getting the right business structure from day one

  • Statutory accounts - prepared and filed with Companies House and HMRC on time every year

  • Corporation tax return - with proactive planning to make sure your liability is as efficient as it can be

  • Director's self assessment - covering your salary, dividends, and any other income

  • Payroll - your director's payroll run correctly and submitted to HMRC on or before every payday

  • VAT - registration, returns, flat rate scheme assessment, and MTD compliance

  • IR35 contract reviews - helping you understand your position and the risk associated with each contract

  • Dividend planning - making sure your extraction strategy is as tax-efficient as possible

  • Ongoing support - being available when a question comes up, without the clock running

  • Fixed fees - agreed in advance

All of our contractor and freelancer services are offered on transparent, fixed-fee pricing. You will know exactly what you are paying before we start, and the ongoing support of our team is built into that fee. For contractors who are used to tracking their effective day rate carefully, knowing your accountancy costs are fixed and predictable matters.

Thinking of switching accountant?

If you are currently with an accountant who handles your returns but has never really talked to you about IR35, your extraction strategy, or whether your current structure is still the right one, switching is simpler than most people expect. Find out how moving to Facts & Figures works.

 

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