Accountants for IT and software contractors
Inside or outside IR35 changes what you keep by roughly £10,800 a year on a £550 day rate. Status depends on how the work is done as well as on the contract, and we review both before you sign.
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Contract for services
Take-home on a £550 day rate, inside and outside IR35
220 days at £550 is £121,000 for the year. Inside IR35 the employer’s National Insurance comes out of the assignment rate first. Outside, a £12,570 salary with the balance drawn as dividends.
Difference in take-home a year, roughly. An inside engagement needs a higher day rate to match the take-home from an outside one.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. This is an example and your figures will differ. Try the IR35 estimator and the salary and dividend calculator.
Who decides your IR35 status
Either way the answer comes from working practices, whatever the contract is titled. Inside IR35, the income is taxed as employment before it reaches you. Outside, the company pays corporation tax and you draw a salary and dividends.
What moves the numbers for an IT contractor
A substitution clause is evidence only if the client would take a substitute. Where everybody involved knows they would not, HMRC will give the clause no weight.
Travel to a client site stops being allowable once you know the engagement there will exceed 24 months, from the date you know, which is usually earlier than the date you pass it. Extensions often trigger it.
The efficient salary moves with the National Insurance thresholds, and a one-person company cannot claim the employment allowance. We recalculate it each April.
How the company is wound up decides whether the reserves come out as dividends or as a capital gain, possibly with Business Asset Disposal Relief. It needs planning a year ahead.
What we do for contractors
Accounts and tax for your company from £49 + VAT a month
Contracts and working practices reviewed
Before you sign, because HMRC looks at both.
The split recalculated each April
Against the current National Insurance and tax thresholds.
The 24-month clock
Watched on every engagement, including the extensions.
Company and personal deadlines
Your company year end and your personal tax year, tracked in one place.
Closing the company, planned a year ahead
Strike-off or liquidation modelled a year before you close.
Contracting experience
Your file is handled by accountants who work with contractors and the off-payroll rules.
Contractors’ questions
How much does it cost?
Accounts and tax start at £29 + VAT a month for a sole trader and £49 + VAT for a limited company, the fee rises with turnover, and the instant quote shows yours in four questions. For a personal service company the work is fairly predictable (bookkeeping, VAT if registered, a small payroll, year-end accounts, the Corporation Tax return, the confirmation statement and your self assessment), so the quote is straightforward. What moves it is a second company, higher volume, or an inside-IR35 arrangement running alongside. FreeAgent is included, worth up to £330 a year, and questions during a contract are covered by the monthly fee.
Can you tell me if I am inside or outside IR35?
We can review a contract and your working practices and tell you what we think. What nobody can do is give you certainty from a questionnaire: status turns on control, the right of substitution, mutuality of obligation, financial risk and how embedded you are with the client. For medium and large private-sector clients and all public-sector bodies, the client issues the determination and you can challenge it. See the IR35 estimator.
How should I be taking money out of my company?
Usually a modest salary around the National Insurance thresholds plus dividends, with employer pension contributions frequently the most efficient route of all: deductible for the company, no National Insurance, and no personal tax at the point of payment. The constraint on dividends is distributable reserves: cash in the bank includes VAT and Corporation Tax that is not yours. Take dividends without reserves and they become a director’s loan with a section 455 charge attached. Model it on the salary and dividend calculator.
What can I claim, and what will get challenged?
Equipment, software, professional subscriptions, insurance, accountancy fees, training that maintains existing skills, and the business proportion of home working are all reliably allowable. The area that generates disputes is travel and subsistence: travel to a client site is only business travel while that site is a temporary workplace, and the 24-month rule means it stops being temporary once you expect to be there beyond two years, at which point past claims can be challenged too. Diarise the 24-month point at the start of a long engagement.
Should I close the company if I take an inside-IR35 contract?
Not necessarily, and it is worth taking slowly because restarting is not free. Many contractors run a mix of inside and outside work, and the company still earns its keep where you have outside engagements, retained profit to extract over time or expect the market to move. Making it dormant is usually a better first step than closing it. Closing a company with substantial reserves has its own tax consequences, and a members’ voluntary liquidation carries anti-avoidance rules if you restart a similar business within two years.
What about the Flat Rate Scheme and VAT?
Check the limited cost trader rule before assuming the Flat Rate Scheme helps. Contractors typically spend very little on goods, which pushes them onto the 16.5% rate and removes almost all of the benefit that made the scheme popular. Standard VAT accounting is usually better once you factor in equipment, software and accountancy on which input VAT can be recovered. Run both on your actual figures. Registration itself becomes compulsory over £90,000 of rolling twelve-month turnover, which most day-rate contractors cross.
See your monthly fee
Answer four questions to see the monthly fee. The full proposal is emailed to you.
Call or WhatsApp 07476 989568 or email hello@buzzaccounting.co.uk
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