{"id":5125,"date":"2026-01-21T11:19:53","date_gmt":"2026-01-21T11:19:53","guid":{"rendered":"http:\/\/localhost:8080\/?page_id=5125"},"modified":"2026-04-14T10:11:09","modified_gmt":"2026-04-14T10:11:09","slug":"outside-ir35-checklist","status":"publish","type":"page","link":"https:\/\/staging.qualitycontracts.co.uk\/guides\/outside-ir35-checklist\/","title":{"rendered":"Outside IR35 checklist"},"content":{"rendered":"\n<article class=\"ir35-article\">\n  <!-- Intro Section -->\n  <div class=\"ir35-intro-section\">\n    <div class=\"ir35-bordered-block\">\n      <p class=\"ir35-text\">\n        For contractors working Outside IR35, managing your business through a\n        limited company offers significant financial and operational benefits.\n        However, it also comes with responsibilities, including navigating tax\n        obligations, ensuring compliance, and planning for financial stability.\n        This detailed checklist provides a step-by-step guide to\n        <strong\n          >help you establish and run a successful contracting business while\n          staying on top of statutory requirements.<\/strong\n        >\n      <\/p>\n      <p class=\"ir35-text\">\n        From sourcing contracts and setting up a limited company to managing\n        your finances, invoicing clients, and avoiding tax traps, this guide\n        covers everything you need to know. It also addresses critical aspects\n        like selecting insurance, building a cash reserve, and optimising tax\n        efficiency through pension contributions and expense claims. With\n        actionable insights and practical advice, this checklist equips you to\n        make informed decisions and confidently tackle the challenges of\n        operating as a limited company contractor.\n      <\/p>\n      <p class=\"ir35-text\">\n        Whether you&#8217;re a seasoned contractor or just starting your journey\n        Outside IR35,\n        <strong\n          >this resource ensures you&#8217;re well-prepared to succeed in the\n          competitive world of contracting.<\/strong\n        >\n        Dive in to discover the tools and strategies to maximise your earnings\n        and build a sustainable business.\n      <\/p>\n    <\/div>\n  <\/div>\n\n  <div class=\"ir35-key-takeaways\">\n    <div class=\"ir35-key-takeaways__inner\">\n      <h3 class=\"ir35-key-takeaways__title\">Outside IR35 Checklist<\/h3>\n      <ul class=\"ir35-key-takeaways__list\">\n        <li>Find a contract<\/li>\n        <li>IR35 assessment<\/li>\n        <li>Incorporation<\/li>\n        <li>Self-assessment<\/li>\n        <li>Bank account<\/li>\n        <li>Accountant<\/li>\n        <li>Accounting software<\/li>\n        <li>Insurance<\/li>\n        <li>Record keeping<\/li>\n        <li>Invoicing<\/li>\n        <li>Statutory reporting requirements<\/li>\n        <li>Saving for taxes<\/li>\n        <li>Pension<\/li>\n        <li>Expenses<\/li>\n        <li>Paying taxes<\/li>\n        <li>Paying yourself<\/li>\n        <li>60% tax trap<\/li>\n        <li>War chest<\/li>\n        <li>Example to delete<\/li>\n      <\/ul>\n    <\/div>\n  <\/div>\n\n  <!-- Do I incorporate before finding a contract? -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">Do I incorporate before finding a contract?<\/h3>\n\n    <p class=\"ir35-text\">\n      One of the most common questions we&#8217;re asked is whether it is necessary to\n      incorporate a limited company, set up a bank account, take out insurance,\n      etc, before finding your first contract. Our answer is always:\n      <strong>no it is not necessary.<\/strong>\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Becoming a limited company director comes with statutory reporting\n      requirements and can incur ongoing accountancy fees. There is no point in\n      starting this process until you have sourced an Outside IR35 contract and\n      are confident a limited company will be required. After all, your first\n      contract could be Inside IR35 , meaning you work through an umbrella\n      company.\n    <\/p>\n  <\/section>\n\n  <!-- 1. Find a contract -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">1. Find a contract<\/h3>\n\n    <p class=\"ir35-text\">\n      Our\n      <a href=\"https:\/\/qualitycontracts.co.uk\/contract-jobs\">contract jobs<\/a>\n      page sources the best contract roles as soon as they&#8217;re available. You can\n      filter the jobs search by &#8216;Outside IR35 Only&#8217;, and if you create a\n      profile, our skills-based matching algorithm will provide targeted job\n      recommendations.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      In the (highly doubtful) situation that you can&#8217;t find a contract role\n      through our website, my best advice would be to reach out directly to\n      relevant recruiters via LinkedIn.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      When I apply for a contract job (whether on an agency&#8217;s website or a\n      third-party platform like LinkedIn), I always try to identify the contact\n      details of the recruiter responsible for that position. I&#8217;ll then contact\n      them to introduce myself and ask if they&#8217;re available to discuss the role.\n      If I can&#8217;t find the recruiter&#8217;s direct contact number but know their name,\n      I&#8217;ll try calling the recruitment agency&#8217;s general number and then asking\n      to be put through to the relevant contact.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Doing this puts you at the forefront of the recruiter&#8217;s mind and makes\n      your profile stand out. After all, contracting is highly competitive, and\n      you need every advantage you can get when you are one of dozens, if not\n      hundreds, that applied.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      To further make your profile stand out, tailor your CV to the specific\n      role you&#8217;re applying for. Although time-consuming, you should adjust your\n      CV to highlight previous projects and specific experiences that are\n      directly relevant.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      It has always been the case that a well-structured and tailored CV will\n      have a better chance of securing an interview than a generalised one, and\n      this is particularly important for contractors given the specialised\n      nature of most jobs. You may find it helpful to create a few &#8216;template&#8217;\n      versions of your CV, each tailored to the different types of contract jobs\n      you are qualified for.\n    <\/p>\n  <\/section>\n\n  <!-- 2. Perform an IR35 assessment -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">2. Perform an IR35 assessment<\/h3>\n\n    <p class=\"ir35-text\">\n      The decision-maker responsible for the SDS is also the party responsible\n      for the additional tax liabilities, interest payments and penalties should\n      the assessment be wrong.\n    <\/p>\n\n    <strong\n      >The responsibility for performing an IR35 assessment lies with the\n      contractor if:<\/strong\n    >\n\n    <ul class=\"ir35-asessment-list\">\n      <li>\n        The client is in the private sector and classified as a small company\n        (i.e. does not meet the definition of medium or large); or\n      <\/li>\n      <li>\n        The client is classified as &#8216;wholly overseas&#8217; with no UK presence.\n      <\/li>\n    <\/ul>\n\n    <p class=\"ir35-text\">\n      <a href=\"https:\/\/www.qdosinsurance.co.uk\/\">Qdos<\/a> Insurance offer a\n      comprehensive contract review, and the cost is an allowable business\n      expense that can be offset against your Corporation Tax liabilities.\n    <\/p>\n  <\/section>\n\n  <!-- 3. Incorporate your company -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">3. Incorporate your company<\/h3>\n\n    <p class=\"ir35-text\">\n      Due to potential tax liability issues, most employers will refuse to work\n      with contractors that operate as sole traders. As such, if you want to\n      work Outside IR35 contracts, you&#8217;ll need to work through a limited\n      company.\n    <\/p>\n\n    <div class=\"ir35-numbered-steps\">\n      <!-- Step 1 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">1<\/div>\n          <h4 class=\"ir35-numbered-step__title\">Incorporate Your Company<\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <div>\n            <p class=\"ir35-numbered-step__text\">\n              You can register a limited company through HMRC&#8217;s website . It&#8217;s\n              relatively easy to do, costs \u00a312, and your company is usually\n              registered within 24 to 48 hours. You can also choose to use a\n              company formation service; simply Google &#8220;company incorporation\n              services&#8221;, and a range of options will come up. Depending on the\n              services offered, these can cost anywhere between \u00a320 and \u00a3100.\n            <\/p>\n            <p class=\"ir35-numbered-step__text\">\n              Upon registration, you&#8217;ll be given a Government Gateway ID,\n              password and a company Unique Taxpayer Reference (UTR). The UTR is\n              sent by post and can take up to 14 days to arrive.\n            <\/p>\n          <\/div>\n        <\/div>\n      <\/div>\n\n      <!-- Step 2 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">2<\/div>\n          <h4 class=\"ir35-numbered-step__title\">\n            Register for Corporation Tax\n          <\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <div>\n            <p class=\"ir35-numbered-step__text\">\n              Unlike VAT and PAYE, signing up for Corporation Tax is compulsory,\n              and you must register within three months of starting to trade.\n            <\/p>\n            <p class=\"ir35-numbered-step__text\">\n              Sign in to your business tax account to register for Corporation\n              Tax. You&#8217;ll need your company&#8217;s Government Gateway user ID and\n              password to sign in and the UTR provided upon incorporation.\n            <\/p>\n            <p class=\"ir35-numbered-step__text\">\n              When registering, you&#8217;ll need to tell HMRC when you started to\n              trade, which will dictate your accounting period for Corporation\n              Tax purposes. HMRC will then provide you with the deadline for\n              paying Corporation Tax.\n            <\/p>\n          <\/div>\n        <\/div>\n      <\/div>\n\n      <!-- Step 3 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">3<\/div>\n          <h4 class=\"ir35-numbered-step__title\">Register for VAT<\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <div>\n            <p class=\"ir35-numbered-step__text\">\n              As a newly incorporated limited company, you must register for VAT\n              if you expect your turnover to exceed \u00a385,000 in the next 30 days.\n              It&#8217;s important to note that turnover is different to taxable\n              income. If you expect to be billing more than \u00a385,000 over the\n              coming year, you should register for VAT.\n            <\/p>\n            <p class=\"ir35-numbered-step__text\">\n              There are two VAT schemes you can choose from:\n            <\/p>\n            <ul class=\"ir35-numbered-inner-list\">\n              <li class=\"ir35-numbered-step__text\">\n                <strong>Flat Rate:<\/strong> You pay a fixed VAT rate to HMRC and\n                keep the difference between what you charge your clients and\n                what you pay. You cannot reclaim the VAT on your purchases.\n              <\/li>\n              <li class=\"ir35-numbered-step__text\">\n                <strong>Standard:<\/strong> You charge clients 20% VAT on all\n                invoices and reclaim 20% on all purchases.\n              <\/li>\n            <\/ul>\n          <\/div>\n        <\/div>\n      <\/div>\n\n      <!-- Step 4 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">4<\/div>\n          <h4 class=\"ir35-numbered-step__title\">Register for PAYE<\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <div>\n            <p class=\"ir35-numbered-step__text\">\n              You must register as an employer with HMRC if you intend to employ\n              and pay staff (even if the only salary you&#8217;ll be paying is your\n              own). You can register as an employer\n              <a href=\"https:\/\/www.gov.uk\/register-employer\">here<\/a>.\n            <\/p>\n            <p class=\"ir35-numbered-step__text\">\n              If you decide to run the payroll process yourself instead of using\n              an accountant, you&#8217;ll need to complete specific tasks before you\n              can pay your employees or yourself. HMRC provide a list\n              <a href=\"https:\/\/www.gov.uk\/paye-for-employers\/setting-up-payroll\"\n                >here<\/a\n              >.\n            <\/p>\n          <\/div>\n        <\/div>\n      <\/div>\n    <\/div>\n  <\/section>\n\n  <!-- 4. Register for self-assessment -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">4. Register for self-assessment<\/h3>\n\n    <p class=\"ir35-text\">\n      If you intend to pay a dividend, you must\n      <a href=\"https:\/\/www.gov.uk\/register-for-self-assessment\">register<\/a> for\n      self-assessment . Self-assessment is the system HMRC use to collect\n      individual taxes owed that are not taxed at source (e.g via PAYE). As the\n      Dividend Tax rate is lower than the Income Tax rate for equivalent income\n      thresholds, most Outside IR35 contractors choose to pay themselves a\n      combination of salary and dividends. You must register for self-assessment\n      if you decide to follow in their footsteps.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      You register for self-assessment via the Government Gateway platform. HMRC\n      will then create an account for you, and you&#8217;ll receive your own Unique\n      Taxpayer Reference. This is different to the limited company&#8217;s UTR\n      received earlier.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      You&#8217;ll also receive a letter with an activation code. Once you activate\n      your account, you can file a self-assessment return any time before the\n      deadline of 31st January following the previous tax year-end of 05th\n      April.\n    <\/p>\n  <\/section>\n\n  <!-- 5. Set up a business bank account -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">5. Set up a business bank account<\/h3>\n\n    <p class=\"ir35-text\">\n      If you&#8217;re a contractor who has recently incorporated a limited company,\n      you must open a business bank account before you start trading and\n      making\/receiving payments. It is a legal requirement for the company to\n      have its own bank account; it can&#8217;t be registered in your name.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      As a limited company contractor, one of the &#8216;challenger&#8217; banks like\n      <a href=\"https:\/\/www.starlingbank.com\/business-account\/\">Starling<\/a>,\n      <a href=\"https:\/\/monzo.com\/business-banking\">Monzo <\/a>or\n      <a href=\"https:\/\/www.tide.co\/\">Tide<\/a> could be the way to go. They offer\n      free accounts, payment notifications, integration with accounting tools\n      like Xero and are known for their fantastic customer service.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      I have personally been using Starling for my business banking for the past\n      three years and can thoroughly recommend them. The app is simple and\n      intuitive, and every time I&#8217;ve had an issue, they&#8217;ve been quick to\n      respond.\n    <\/p>\n  <\/section>\n\n  <!-- 6. Hire an accountant -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">6. Hire an accountant<\/h3>\n\n    <p class=\"ir35-text\">\n      Although it is not a legal requirement to employ an accountant, doing so\n      will save you countless hours of administrative burden and simplify\n      running your limited company. An accountant can help you with steps (3)\n      and (4) above. They will set up your limited company and register for all\n      personal and business taxes.\n    <\/p>\n  <\/section>\n\n  <!-- 7. Consider accounting software -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">7. Consider accounting software<\/h3>\n\n    <p class=\"ir35-text\">\n      Accounting software facilitates the maintenance of appropriate financial\n      records (receipts, payments, salaries, etc.) and simplifies invoicing.\n      Most contractor accountants provide access to off-the-shelf software or\n      have their own bespoke accounting portals.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Accounting software providers love to tout their uniqueness; however, most\n      are incredibly similar. They usually include invoice creation, bank feed\n      integration, VAT and payroll, and simplified tax return filings.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      <a href=\"https:\/\/www.freeagent.com\/\">FreeAgent<\/a> is one of the most\n      popular choices for contractors.\n    <\/p>\n  <\/section>\n\n  <!-- 8. Consider insurance -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">8. Consider insurance<\/h3>\n\n    <p class=\"ir35-text\">\n      You must take out employer&#8217;s liability insurance if you have employees.\n      That said, you are exempt as a contractor if you are the director of your\n      limited company, are the sole employee and own more than 50% of the\n      shares.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Although not legally required, most Outside IR35 contracts will stipulate\n      a certain level of necessary professional indemnity insurance.\n      Professional indemnity insurance covers where a mistake in your services\n      causes a third-party financial loss.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Most large insurance providers will provide policies catering to the\n      contractor and freelance workforce; however, you may be best going through\n      a specialist such as\n      <a href=\"https:\/\/www.goqdos.com\/insurance\">Qdos<\/a> or\n      <a href=\"https:\/\/www.kingsbridge.co.uk\/\">Kingsbridge<\/a>.\n    <\/p>\n  <\/section>\n\n  <!-- 9. Maintain appropriate records -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">9. Maintain appropriate records<\/h3>\n\n    <p class=\"ir35-text\">\n      As a Director of a limited company, you must remember to maintain records\n      about the company and appropriate financial and accounting records. An\n      accountant and accounting software can help with this. HMRC provide a\n      <a\n        href=\"https:\/\/www.gov.uk\/running-a-limited-company\/company-and-accounting-records\"\n        >guide<\/a\n      >\n      as to what records need to be kept.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Once you have begun working for your client, I recommend keeping a record\n      of your work. If you are paid by the hour, record what you have done every\n      hour. If you are paid by the day, do it daily. Unless the client asks for\n      a timesheet, the records don&#8217;t have to be hugely detailed. They can\n      briefly describe the work performed, who you spoke to, any emails sent,\n      etc.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Keeping a record will be of immense help should the client ever have a\n      problem with one of your invoices and query the time you are billing them\n      for. You can look at your records and explain what you were working on.\n      Although not strictly necessary, it can make your life easier if\n      challenged.\n    <\/p>\n  <\/section>\n\n  <!-- 10. Invoice the client -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">10. Invoice the client<\/h3>\n\n    <p class=\"ir35-text\">\n      HMRC\n      <a\n        href=\"https:\/\/www.gov.uk\/invoicing-and-taking-payment-from-customers\/invoices-what-they-must-include\"\n        >states<\/a\n      >\n      that invoices must include:\n    <\/p>\n\n    <ul class=\"ir35-numbered-inner-list\">\n      <li>a unique identification number<\/li>\n      <li>your company name, address and contact information<\/li>\n      <li>the company name and address of the customer you&#8217;re invoicing<\/li>\n      <li>a clear description of what you&#8217;re charging for<\/li>\n      <li>the date the goods or service were provided (supply date)<\/li>\n      <li>the date of the invoice<\/li>\n      <li>the amount(s) being charged<\/li>\n      <li>VAT amount if applicable<\/li>\n      <li>the total amount owed<\/li>\n    <\/ul>\n    <br \/>\n\n    <p class=\"ir35-text\">\n      Most accounting software and some business banking applications will have\n      an invoicing feature that lets you populate template invoices. As an\n      example, here is\n      <a href=\"https:\/\/www.starlingbank.com\/features\/create-and-send-invoices\/\"\n        >Starling&#8217;s<\/a\n      >. These features save you from having to manually Google &#8220;Invoice\n      Templates&#8221; or creating your own version in Microsoft Word.\n    <\/p>\n  <\/section>\n\n  <!-- 11. Stay on top of statutory reporting requirements -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">\n      11. Stay on top of statutory reporting requirements\n    <\/h3>\n\n    <p class=\"ir35-text\">\n      If you have hired an accountant (recommended), they will deal with the\n      statutory reporting requirements of your limited company. Once you have\n      provided them with the transactional information (receipts and payments),\n      they will submit the relevant returns on your behalf.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      The primary filing requirements for your company are statutory accounts,\n      confirmation statements, Corporation Tax returns and VAT and PAYE returns,\n      if applicable. You&#8217;ll also need to file a self-assessment tax return;\n      however, again, your accountant should be able to do this for you.\n    <\/p>\n  <\/section>\n\n  <!-- 12. Save for taxes -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">12. Save for taxes<\/h3>\n\n    <p class=\"ir35-text\">\n      Unlike working Inside IR35 through a limited company, working Outside IR35\n      via your own limited company means your taxes are not deducted at source.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      After you have invoiced your client, you will receive a single lump sum\n      payment. From this you will need to calculate and pay all the relevant\n      taxes:\n    <\/p>\n\n    <ul class=\"ir35-numbered-inner-list\">\n      <li>VAT (if applicable)<\/li>\n      <li>Corporation Tax<\/li>\n      <li>Income and Dividend Tax<\/li>\n      <li>National Insurance Contributions<\/li>\n    <\/ul>\n\n    <p class=\"ir35-text\">\n      An accountant and accounting software can help you calculate the amount of\n      taxes owed and keep you informed about the relevant payment deadlines.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      To ensure you have enough money available to pay the taxes, you should set\n      aside a proportion of the revenue you receive.\n    <\/p>\n\n    <div class=\"ir35-highlight\">\n      <div class=\"ir35-highlight__icon\">\n        <img decoding=\"async\"\n          src=\"\/guides\/wp-content\/themes\/astra-child\/images\/exclamation.png\"\n          alt=\"Highlight\"\n        \/>\n      <\/div>\n      <p class=\"ir35-highlight__text\">\n        To ensure you have enough money available to pay the taxes, you should\n        set aside a proportion of the revenue you receive.\n      <\/p>\n    <\/div>\n\n    <p class=\"ir35-text\">\n      When working Outside IR35, I set aside 20% of everything I bill to cover\n      VAT, then 40% of what remains to cover my Corporation Tax and Dividend Tax\n      liabilities.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      The 40% figure is an overestimate, and I&#8217;m always left with money left\n      over in this &#8216;tax pot&#8217; at the end of the year. That said, I&#8217;d rather be\n      prudent and ensure my taxes are covered than struggle to find money once\n      my self-assessment has been submitted. You get to &#8216;keep the change&#8217;\n      anyway.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      I can&#8217;t stress how important this advice is; it&#8217;s incredibly easy to\n      perceive yourself as richer than you actually are when you start\n      contracting.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      Take a contractor earning \u00a3500 per day and working 20 days a month. They\n      will invoice their client for \u00a312,000 (\u00a310,000 earnings + \u00a32,000 VAT).\n      \u00a312,000 is a lot of money to receive into a bank account and can lead to\n      overspending as, of that \u00a312,000, only \u00a36,500 &#8216;belongs&#8217; to the contractor\n    <\/p>\n\n    <ul class=\"ir35-numbered-inner-list\">\n      <li>\u00a32,000 is VAT<\/li>\n      <li>\u00a31,900 is Corporation Tax<\/li>\n      <li>\u00a31,600 is Income Tax<\/li>\n    <\/ul>\n\n    <p class=\"ir35-text\">\n      Many challenger banks have virtual savings spaces where you can keep pots\n      of money separate from your principal balance. You can see an example of\n      Starling Bank&#8217;s\n      <a href=\"https:\/\/www.starlingbank.com\/features\/spaces\/\">here<\/a>.\n    <\/p>\n  <\/section>\n\n  <!-- 13. Pay into your pension -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">13. Pay into your pension<\/h3>\n\n    <p class=\"ir35-text\">\n      For limited company contractors working Outside IR35, the most\n      tax-efficient way as a limited company director:\n    <\/p>\n\n    <div class=\"ir35-numbered-steps\">\n      <!-- Step 1 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">1<\/div>\n          <h4 class=\"ir35-numbered-step__title\">\n            Apply for an auto-enrolment exemption\n          <\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <p class=\"ir35-numbered-step__text\">\n            Apply for an auto-enrolment exemption from the Pensions Regulator to\n            avoid contributing to a workplace pension scheme.\n          <\/p>\n        <\/div>\n      <\/div>\n\n      <!-- Step 2 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">2<\/div>\n          <h4 class=\"ir35-numbered-step__title\">Set up a SIPP<\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <p class=\"ir35-numbered-step__text\">\n            Speak to a financial advisor if unsure which SIPP to go for.\n          <\/p>\n        <\/div>\n      <\/div>\n\n      <!-- Step 3 -->\n      <div class=\"ir35-numbered-step\">\n        <div class=\"ir35-numbered-step__header\">\n          <div class=\"ir35-numbered-step__number\">3<\/div>\n          <h4 class=\"ir35-numbered-step__title\">\n            Pay into the pension directly from your limited company\n          <\/h4>\n        <\/div>\n        <div class=\"ir35-numbered-step__content\">\n          <p class=\"ir35-numbered-step__text\">\n            You can pay up to \u00a360,000 and carry over any unused allowance from\n            the previous three years.\n          <\/p>\n        <\/div>\n      <\/div>\n    <\/div>\n\n    <p class=\"ir35-text\">\n      If you&#8217;re unsure about any of the above, we recommend speaking to a\n      pension specialist so they can provide bespoke advice tailored to your\n      individual circumstances.\n    <\/p>\n  <\/section>\n\n  <!-- 14. Claim allowable expenses -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">14. Claim allowable expenses<\/h3>\n\n    <p class=\"ir35-text\">\n      As a limited company owner, claiming costs as business expenses reduces\n      your business &#8216;profit-before-tax&#8217;. This, in turn, reduces the amount of\n      Corporation Tax owed to HMRC. For an expense claim to be &#8216;allowable&#8217;, it\n      must be incurred &#8216;wholly and exclusively&#8217; in the performance of the duties\n      of the employment.\n    <\/p>\n  <\/section>\n\n  <!-- 15. Pay your taxes -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">15. Pay your taxes<\/h3>\n\n    <p class=\"ir35-text\">\n      As a director of a limited company, you&#8217;ll likely need to pay a\n      combination of:\n    <\/p>\n\n    <ul class=\"ir35-numbered-inner-list\">\n      <li>VAT<\/li>\n      <li>Corporation Tax<\/li>\n      <li>Income Tax<\/li>\n      <li>National Insurance<\/li>\n      <li>Dividend Tax<\/li>\n    <\/ul>\n\n    <p class=\"ir35-text\">\n      Exactly what you need to pay is determined by how much revenue you\n      generate and how you decide to extract money from your company. If you&#8217;ve\n      decided to employ an accountant to help you run your company (which I\n      highly recommend), they will handle your tax calculations.\n    <\/p>\n  <\/section>\n\n  <!-- 16. Pay yourself -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">16. Pay yourself<\/h3>\n\n    <p class=\"ir35-text\">\n      Seeking advice from your accountant is essential when deciding how to pay\n      yourself when working through a limited company. In general, if you have\n      no other sources of income beyond your limited company and are a sole\n      director, you want to either pay yourself a salary of \u00a312,570 or a salary\n      of \u00a39,100, with the rest being paid as dividends.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      It&#8217;s important to note that you don&#8217;t have to take all your money out of\n      your limited company; you can also leave some as retained earnings.\n    <\/p>\n  <\/section>\n\n  <!-- 17. Avoid 60% tax trap -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">17. Avoid 60% tax trap<\/h3>\n\n    <p class=\"ir35-text\">\n      As mentioned above, the standard personal allowance is \u00a312,570 per year.\n      However, if your income exceeds \u00a3100,000, this is reduced by \u00a31 for every\n      \u00a32 over \u00a3100,000. What this means in real terms is that, for every \u00a3100\n      you earn between \u00a3100,000 and \u00a3125,140, you only get to keep \u00a340.\n    <\/p>\n\n    <div class=\"ir35-highlight\">\n      <div class=\"ir35-highlight__icon\">\n        <img decoding=\"async\"\n          src=\"\/guides\/wp-content\/themes\/astra-child\/images\/exclamation.png\"\n          alt=\"Highlight\"\n        \/>\n      <\/div>\n      <p class=\"ir35-highlight__text\">\n        Of the \u00a360 you don&#8217;t keep, \u00a340 is deducted in Income Tax, and \u00a320 is\n        lost to the taper. As this is an effective tax rate of 60%, it is known\n        as a &#8216;tax trap&#8217;.\n      <\/p>\n    <\/div>\n\n    <p class=\"ir35-text\">\n      Most contractors try to avoid the 60% tax trap by paying more into their\n      pension, reducing their qualifying earnings below the \u00a3100,000 threshold.\n      Not only does this save Income Tax, it boosts your retirement fund at the\n      same time.\n    <\/p>\n  <\/section>\n\n  <!-- 18. Build a war chest -->\n  <section class=\"ir35-section\">\n    <h3 class=\"ir35-title-h3\">18. Build a war chest<\/h3>\n\n    <p class=\"ir35-text\">\n      A &#8216;war chest&#8217; is a cash reserve that acts as your rainy-day fund, a\n      financial fallback intended for use if your income drops. As a contractor,\n      your income can drop for any number of reasons.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      You may be forced to take sick leave. A client could be late paying an\n      invoice. Or, most commonly, you may not be able to find a contract,\n      experiencing a break between assignments. It is a very real possibility\n      that you go for months without work (and income).\n    <\/p>\n\n    <p class=\"ir35-text\">\n      If this happens, you must have money put aside to cover your outgoings,\n      particularly if you have dependents like children. Although you should\n      already have a war chest before starting to contract, I recommend topping\n      it up with whatever you can afford when working.\n    <\/p>\n\n    <p class=\"ir35-text\">\n      How much is enough? Only you can answer that based on your monthly\n      outgoings. A good rule of thumb is to save enough so that you can survive\n      if you go without income for 6 to 9 months. Although this may sound\n      excessive, the more you save into your war chest, the less stressed you&#8217;ll\n      be when you go through a period without work.\n    <\/p>\n  <\/section>\n<\/article>\n\n","protected":false},"excerpt":{"rendered":"<p>For contractors working Outside IR35, managing your business through a limited company offers significant financial and operational benefits. However, it [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"acf":[],"_links":{"self":[{"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/pages\/5125"}],"collection":[{"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/comments?post=5125"}],"version-history":[{"count":5,"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/pages\/5125\/revisions"}],"predecessor-version":[{"id":5189,"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/pages\/5125\/revisions\/5189"}],"wp:attachment":[{"href":"https:\/\/staging.qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/media?parent=5125"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}