Accountants for contractors

Contractors in IT, engineering, consultancy and similar fields often work through their own limited company, which brings company accounts, payroll, dividends and the off-payroll working rules into the picture. This page explains those moving parts as general information rather than advice. If you would like help, we read every enquiry and, where we can, put you in touch with a local accountant.

What contractor accounting covers

A contractor is usually someone who sells their skills to a client for a fixed period or project, rather than being taken on as an employee. Many contractors run a small limited company, sometimes called a personal service company, which invoices the client and then pays the contractor through a mix of salary and dividends.

Accounting for that setup involves a run of linked jobs: keeping the company's books, running a director's payroll, preparing annual accounts for Companies House, filing a company tax return with HMRC, dealing with VAT if the company is registered, and completing the director's own Self Assessment return. On top of that sits the question that shapes the whole arrangement: whether the off-payroll working rules, often still called IR35, apply to each contract.

Typical contractor situations

A few examples show how varied this can be:

a software developer leaving a permanent job to take a six-month contract with a bank
an engineer moving between short projects for several smaller firms
a project manager whose client has decided a contract falls inside the rules
a consultant who works some contracts through their own company and others through an umbrella company
a contractor winding down their company after deciding to go back to employment

Each of these raises different questions, and the right structure for one contract may not suit the next.

Off-payroll working and the tax rates that matter

GOV.UK's guidance on off-payroll working (last updated 26 February 2026) explains that in most cases the client is responsible for determining the employment status of the worker. Where the client is a small business outside the public sector, the worker's intermediary, typically the contractor's own company, is responsible for deciding the worker's employment status and whether the rules apply. Clients who decide should produce a status determination statement, including the reasons for their determination. HMRC's check employment status for tax (CEST) tool can help with the decision. We do not set out the detailed tests here, so read the GOV.UK guidance or ask an accountant about a specific contract.

When a contract is outside the rules, the company's profits are taxed through corporation tax and then paid out. These are the 2026 to 2027 figures most contractors meet:

Common figures for contractors working through a limited company (GOV.UK)
Item	Figure
Corporation tax small profits rate	19% on profits under £50,000
Corporation tax main rate	25% on profits over £250,000
Dividend allowance	£500
Dividend tax rates	10.75%, 35.75% and 39.35%
Employee and director NI primary threshold	£12,570 a year
Employer NI rate and secondary threshold	15% above £5,000 a year
Company tax return deadline	12 months after the end of the accounting period
Corporation tax payment	Usually 9 months and one day after the end of the accounting period

Running it yourself or using an accountant

Some contractors keep their own books in cloud software, run a simple director's payroll and send their own returns. If you have one long contract, no staff and a tidy bank account, that is achievable, though company accounts and the corporation tax return take more care than a personal return.

Most people bring in an accountant for at least the year-end, and many use one throughout because so many deadlines overlap: payroll submissions, VAT returns, Companies House accounts, the confirmation statement, the company tax return and Self Assessment. A missed Companies House deadline alone starts at £150 for a private company. Others want someone to look at a new contract before signing, or to talk through whether an umbrella company would be simpler.

If you are only just setting up, our page on setting up a limited company covers the first steps, and VAT returns explains how VAT works once you register.

What to ask a contractor accountant

Contractor packages vary widely, so compare what is actually included:

Does the monthly fee cover accounts, the company tax return, payroll, VAT and my personal return?
Will you review contracts or status determination statements, and is that extra?
What happens to the fee if I go inside the rules or close the company?
Which bookkeeping software do you use and do I get access?
Who supervises you for anti-money laundering? Accountancy service providers must be supervised by HMRC or a professional body, and trading while not registered is a criminal offence.
Will a named person handle my account?

Get the scope of work and fees in writing.

What contractor accounting might cost

Contractors usually pay a monthly fee for a limited company package. Sleek says most small limited companies pay £60 to £250+ a month for accountancy (VAT not stated). Local firms set their own fees; see our guide to accountant costs.

Common questions

Who decides whether IR35 applies to my contract?

According to GOV.UK, in most cases the client decides and should give you a status determination statement with reasons. If the client is a small business outside the public sector, your own company makes the decision instead.

Do I need a limited company to contract?

No. Some contractors work as sole traders and others through umbrella companies, which employ them and run payroll. Which route suits you depends on the contract, the client and your own circumstances, so it is worth checking with an accountant before you commit.

How are dividends from my company taxed?

For 2026 to 2027 the first £500 of dividends is covered by the dividend allowance. Above that, dividends are taxed at 10.75%, 35.75% or 39.35% depending on which income tax band they fall into.

Is there an official tool for checking employment status?

Yes. GOV.UK says the check employment status for tax (CEST) tool can be used to help make a determination. It is a starting point, and the result depends on the answers given about the actual working arrangements.

What if I close my company between contracts?

A company that stops trading still has filing obligations, such as accounts and a confirmation statement, until it is formally closed. An accountant can explain the options and what each would cost, as this varies from case to case.

Sources for the figures on this page

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