Status reviewed on every engagement
The contract and the working practices, because HMRC looks at both and only one of them is in the file.
Consultants
Almost no costs, so almost everything is profit
That is a good business and it has one consequence: there is very little to deduct, so the tax follows the revenue. The two levers that genuinely move it both have to be pulled before your year end.
What you get
- Status reviewed on every engagement
- The pension decision made in time to count
- Flat rate versus standard recalculated
- The 24-month travel clock watched
- Work in progress in your monthly numbers
- One fixed monthly fee
The numbers that decide it
Four figures worth knowing by heart
Four numbers shape a consultancy. The middle one is the one people forget exists.
16.5%Flat rate, for a limited cost trader
26.5%Effective CT between £50k and £250k
24 monthsWhen client-site travel stops being allowable
£90,000VAT registration, on rolling turnover
2026/27 figures. See key tax dates and the calculators for the full picture.
Your year
One deadline that is not a filing date
The pension contribution is the only item here where being a week late costs you money rather than a penalty.
Your year endEverything company-side is measured from it, including the pension deadline.
Before the year endThe pension contribution has to be paid, not just decided.
+9 months, 1 dayCorporation tax due.
+9 / +12 monthsAccounts at Companies House, then the CT600 at HMRC.
Every VAT quarterReturn and payment, one month and seven days after the period ends.
Every engagementStatus re-examined. It attaches to the engagement, not to you.
Source: gov.uk Corporation Tax, VAT flat rate scheme and off-payroll working guidance, checked July 2026.
The thing that makes it different
Almost no costs, so almost everything is profit
A consultancy has no stock, little equipment and very few purchases. That is a lovely business to run and it has one consequence worth understanding: there is nothing much to deduct, so profit is close to revenue and the tax follows it.
It also breaks the flat rate scheme, which was designed for businesses that buy things. The limited cost trader rules put most consultancies on 16.5%, and if you are still on it because somebody set it up years ago, it is probably costing you.
The two levers that genuinely move a consultant's tax are an employer pension contribution and getting the status question right. Both have to be decided before the year end, which is the argument for talking to an accountant in month nine rather than month fifteen.
The detail that decides it
What actually moves the numbers in consultancy
Consultancy is a simple business to run and an easy one to get wrong on status, VAT and timing.
- Off-payroll working
- If you work through your own company for a medium or large client, that client decides your IR35 status and issues a determination. If the client is small, the decision stays with your company — and so does the liability if it is wrong. The answer turns on control, substitution and mutuality of obligation, not on what the contract calls you.
- The flat rate scheme is usually not worth it any more
- The limited cost trader rules put most consultancies on 16.5%, which for a business with almost no purchases is worse than the standard scheme once you account for the input tax you give up. Worth recalculating rather than staying on it out of habit.
- The 24-month rule
- Travel to a client site stops being allowable once you know you will be there for more than 24 months, and the clock starts when you know, not when you pass it. Long engagements at one client are where consultants most often have expenses disallowed.
- Work in progress
- Time spent on a fixed-fee engagement that has not been invoiced is still an asset and it belongs in the accounts. Ignoring it makes a good month look flat and a flat one look like a problem, which is a bad basis for the decisions you make in between.
- Pension is the main lever
- For a consultancy with no plant and few costs, an employer pension contribution from the company is usually the single largest legitimate reduction in the corporation tax bill — and one of the few decisions that has to be made before the year end rather than after it.
The lever that actually works
An employer pension contribution, worked through
£120,000 of profit, before anything is decided
A one-person consultancy, year to 31 March 2027, £120,000 of profit before any pension contribution. No associated companies.
- Profit before pension contribution
- £120,000
- Corporation tax — 25% less marginal relief of 3/200 × £130,000
- £28,050
- Employer pension contribution instead
- −£20,000
- Profit after the contribution
- £100,000
- Corporation tax on £100,000 — 25% less relief of 3/200 × £150,000
- £22,750
- Corporation tax saved
- £5,300
£20,000 into your pension costs the company £14,700 after tax, because profit in the £50,000–£250,000 band carries an effective 26.5% marginal rate. It only works if the contribution is actually paid before the year end — a decision made in month fifteen saves nothing.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. An example, not advice — your figures will differ.
What we do about it
Small business, sharp edges
The pension decision, before the year end
Modelled on your actual profit, at the point it can still change the answer.
The VAT scheme recalculated
Flat rate against standard, once a year, on your real numbers rather than the assumption you started with.
The 24-month clock watched
On every long engagement, so travel stops being claimed at the right moment.
Work in progress in the numbers
So a month with no invoice in it does not read as a bad month.
A conversation in month nine
Not month fifteen, when everything that could have been decided has already happened.
Questions
What people in this trade ask us
How much does it cost?
A fixed monthly figure agreed in writing after a 30-minute discovery call. Consulting is usually one of the simpler engagements — modest transaction volume, few or no staff — so the quote is straightforward, and the variables are whether you are VAT registered, whether you run a company or trade as a sole trader, and whether there is any payroll. FreeAgent is included, worth up to £330 a year. There is no hourly charge for questions, which matters when a structure decision comes up mid-year.
Sole trader or limited company — which should I be?
Start as a sole trader unless something specific points the other way, and revisit it annually. The tax gap is narrower than it used to be once Corporation Tax at 19% to 25% and dividend rates are counted, and a company adds public accounts, payroll, filings and cost. What genuinely pushes towards incorporation: profits consistently above what you need to draw, clients who will only contract with a company, and liability you want ring-fenced. What does not: the assumption that it automatically saves tax. See the comparison guide.
Is my income lumpy enough to be a problem?
Almost certainly, and the fix is a reserve rather than a forecast. Consulting income arrives in blocks — a three-month engagement, then a gap — while tax, VAT and drawings arrive on a schedule that does not care. The discipline that works is moving a fixed percentage of every payment received into a separate tax account the day it lands, plus a buffer of two to three months of personal costs. That single habit prevents most of the cash crises we see in one-person consultancies, and it costs nothing to implement.
What expenses can I actually claim?
Professional subscriptions and indemnity insurance, equipment and software, training that maintains existing skills, accountancy fees, and the business proportion of home working and phone. The two that get challenged most are travel and subsistence, where journeys to a client that has become your normal place of work are commuting rather than business travel, and training that develops a genuinely new skill rather than maintaining an existing one — the latter is often treated as capital and disallowed. Keep the records digitally as you go.
Should I register for VAT?
Compulsory over £90,000 of rolling twelve-month turnover, which most full-time consultants cross. Below that, voluntary registration makes sense when your clients are VAT-registered businesses that reclaim it anyway, because you then recover VAT on your own costs. If you advise charities, small unregistered businesses or individuals, it makes you 20% more expensive. Check the Flat Rate Scheme carefully rather than assuming it saves money — consultants usually fall foul of the limited cost trader rule and end up on 16.5%, which removes most of the benefit.
What if I am working through my own company for one main client?
Then IR35 needs looking at properly, because a single long-term client with fixed hours and integration into their organisation is the pattern that attracts scrutiny. Status depends on control, substitution, mutuality of obligation and financial risk rather than on your job title or the fact you invoice. For medium and large private-sector clients and all public-sector bodies, they issue a Status Determination Statement, which you can challenge. Get the contract and the working practices reviewed before signing rather than after the determination arrives.
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