Accountants for Contractors
IR35 reviews, limited company set-up, salary and dividend planning and quarterly VAT for contractors across North London and Hertfordshire. One fixed monthly fee, one accountant, no call centre.
Contracting through your own limited company is still the most flexible way to work for many IT, engineering, finance and project professionals, but the rules around it have tightened every few years. The off-payroll working rules moved status decisions to medium and large clients in 2021. Dividend tax rates rose again in April 2026. And from April 2026 the agencies that place contractors through umbrella companies carry the liability if the umbrella fails to operate PAYE properly.
We act for contractors who commute into London from Potters Bar, Barnet, Enfield, Finchley and across Hertfordshire, and for contractors anywhere in the UK who prefer a small firm where they speak to the same accountant each time. The work is straightforward when it is done properly: a company that is set up correctly, a remuneration plan that reflects the current rates, VAT filed each quarter, and a year end that holds no surprises.
Below we explain how we work with contractors, what the 2026/27 numbers look like for a typical contractor company, and the questions we are asked most often about IR35, umbrellas and getting money out of the company tax-efficiently.
What contractors usually need help with
IR35 and status determinations
If your client is a medium or large business, it decides whether the engagement is inside or outside IR35 and must give you a status determination statement. If the client is small, the decision and the risk sit with you. We review contracts and working practices, and we help you challenge a determination you disagree with.
Limited company, umbrella or sole trader
Outside IR35, a limited company is usually the most tax-efficient route. Inside IR35, an umbrella or a deemed employment payroll through your own company can both work. We compare the take-home under each route with your actual day rate and expenses.
Salary and dividends
The right mix in 2026/27 is usually a salary at or around the £12,570 personal allowance, then dividends from post-tax profit. We set the numbers each April, check distributable reserves before every dividend and produce the vouchers and board minutes HMRC expects.
VAT and the flat rate scheme
Most contractor companies register for VAT once turnover approaches £90,000, and many register earlier. The flat rate scheme rarely helps a limited cost trader at the 16.5% rate, so we check the standard scheme against it before choosing.
Expenses and the 24-month rule
Travel and subsistence to a client site are deductible until you know the engagement will exceed 24 months at the same location. Home office, equipment, training, insurance and professional subscriptions all need the right treatment. We keep the claims defensible.
Pensions through the company
Employer pension contributions are deductible for corporation tax and free of National Insurance, which makes them the most efficient way to extract profit you do not need to spend. We coordinate with your adviser on the amounts and timing.
Services for contractors
Company formation and accounts
Incorporation, registrations, statutory accounts, corporation tax return and confirmation statement, all on one fixed fee.
Learn more →Tax planning
Salary and dividend planning, pension contributions, company cars and closing the company with Business Asset Disposal Relief when you stop contracting.
Learn more →Payroll
Director payroll with RTI submissions each month, and deemed employment payroll for inside-IR35 engagements run through your own company.
Learn more →VAT returns
Registration, scheme selection and quarterly MTD returns filed from Xero.
Learn more →Personal tax
Self assessment for you and, where relevant, a spouse shareholder, with dividend and other income reconciled to the company.
Learn more →Xero setup
A contractor-ready Xero file with bank feeds, invoice templates and expense capture from your phone.
Learn more →IR35 in 2026: who decides, and what it costs to get it wrong
IR35 asks whether, ignoring the company in the middle, you would be an employee of the client. The tests have not changed: control over how the work is done, whether you must do it personally or can send a substitute, and whether there is a mutual obligation to offer and accept work. What changed in April 2021 is who applies them. Medium and large clients must now assess every engagement, issue a status determination statement and, if the answer is inside, deduct PAYE and National Insurance at source, either directly or through an agency.
Small clients, broadly those meeting two of turnover under £10.2 million, balance sheet under £5.1 million and fewer than 50 employees, are exempt. For those engagements you assess your own status and carry the risk of an HMRC enquiry. Getting it wrong means paying the tax and National Insurance that should have been deducted, with interest and potentially penalties, going back several years.
We review the contract and, more importantly, the working practices, because HMRC looks at what actually happens rather than what the paperwork says. Where an engagement is genuinely outside IR35 we help you evidence it. Where it is inside, we work out whether an umbrella or a deemed payment through your own company leaves you better off.
Salary and dividends for a contractor company in 2026/27
For a director with no other income, a salary of £12,570 uses the personal allowance in full, earns a qualifying year for the state pension, and costs the company a small amount of employer National Insurance, because the secondary threshold is £5,000 and the Employment Allowance is not available to a company whose only employee is a director. The salary is deductible for corporation tax, so the net cost is lower than it looks.
Profit after the salary is taxed at 19% on the first £50,000 and at an effective 26.5% on profits between £50,000 and £250,000 through marginal relief. Dividends paid from what is left are taxed personally at 0% on the first £500, then 10.75% up to the basic rate limit of £50,270 of total income, 35.75% to £125,140 and 39.35% above. A contractor billing around £100,000 a year typically keeps materially more through the company than through an umbrella, even after the April 2026 dividend rate increases, provided the engagement is outside IR35.
The numbers move every April and they depend on your other income, your spouse's position and how much you actually need to draw. We recalculate the plan at the start of each tax year rather than leaving last year's figures running. Try our dividend tax calculator for a quick estimate before we talk.
- Salary set each April against the current allowance and thresholds
- Dividends checked against distributable reserves before payment
- Dividend vouchers and board minutes prepared for every payment
- Pension contributions and other extraction routes modelled alongside dividends
Umbrella, limited company or sole trader?
An umbrella company employs you, invoices the agency and pays you through PAYE after its margin and employer costs. It is simple, and for short or inside-IR35 contracts it is often the sensible choice. From April 2026 the agency, or the end client where there is no agency, is responsible for the PAYE an umbrella should have operated, which should reduce the number of non-compliant umbrellas but makes agencies more selective about which ones they use.
A limited company gives you control over timing and the ability to pay dividends, contribute to a pension from the company and retain profit at corporation tax rates. It also brings statutory accounts, a corporation tax return, a confirmation statement with the Companies House identity verification that has applied to directors since November 2025, VAT returns and payroll, which is what our fixed fee covers.
Sole trader status is rarely available to contractors placed through agencies, because agency legislation treats such workers as employees for tax. It can work for contractors who find their own clients directly and whose engagements are clearly outside IR35.
Why contractors choose IAK
- Fixed monthly fee covering accounts, tax, payroll, VAT and self assessment
- IR35 contract and working practice reviews from a qualified accountant
- Salary and dividend plan refreshed every April
- Same-day answers on weekdays, by phone, email or WhatsApp
- Xero set-up and training included
- No tie-in and no charge to leave
Frequently asked questions
How much does a contractor accountant cost?
A single-director contractor company usually sits at the lower end of our £150 to £450 a month range, which covers bookkeeping, VAT returns, director payroll, statutory accounts, the corporation tax return, the confirmation statement and your personal self assessment. We quote a fixed fee in writing before you sign anything.
Can you set up my limited company?
Yes. We incorporate the company, register it for corporation tax, PAYE and VAT where appropriate, set up the Xero file and the business bank feed, and give you an invoicing template. Most contractors are ready to invoice within a week.
My client has said I am inside IR35. Do I have to accept it?
You can challenge a status determination through the client's disagreement process, and the client must respond within 45 days. We review the contract and working practices and help you put the case together. If the determination stands, we compare an umbrella against a deemed payment through your own company so you choose the better route.
Should I use the VAT flat rate scheme?
Usually not any more. Most contractors are limited cost traders under the flat rate rules and pay 16.5% of gross turnover, which is more than they would pay on the standard scheme once input VAT on expenses is reclaimed. We check both against your actual costs before registering.
Can I pay my spouse from the company?
A spouse can be paid a salary for genuine work at a commercial rate, and can hold shares and receive dividends. The share route is well established following the Arctic Systems case, but it needs to be set up properly, with ordinary shares carrying full rights. We advise on the structure and document it.
What happens when I stop contracting?
If the company has retained profit, a members' voluntary liquidation lets you take it out as capital, taxed at 18% under Business Asset Disposal Relief if you qualify, rather than as dividends. Below £25,000 a simple strike-off may achieve the same result. We plan the exit a year or so in advance so nothing is wasted.
Do you work with contractors outside North London?
Yes. Everything runs through Xero, email and video calls, so we act for contractors across the UK. Local clients in Potters Bar, Barnet, Enfield, Finchley and Hertfordshire are welcome to meet us at the office in Cuffley.
Guides and calculators on this topic
Free reading and tools from our insights library if you want the detail before you speak to us.
Contracting should be simple. Let us keep it that way.
Send us your current contract and last year's accounts. We will tell you where you stand on IR35, what the right salary and dividend mix looks like for 2026/27, and what a fixed monthly fee would be.