Limited company (Ltd)
UK private company structure popular among contractors, offering limited liability and tax-efficient profit extraction via salary and dividends.
A limited company is a separate legal entity from its owners (shareholders). For UK freelancers, operating through a personal service company (PSC) is one of the most tax-efficient structures, especially for higher-earning consultants outside IR35.
Directors typically pay themselves a small salary (often up to the National Insurance threshold) and extract additional profit as dividends, which are taxed at lower rates than salary above the personal allowance.
Formation costs around £12 via Companies House and takes minutes online. Annual obligations include filing accounts, a confirmation statement, and corporation tax returns.
- Limited liability: personal assets protected if the company faces debts
- Corporation tax: 19-25% depending on profit (2024)
- Dividends taxed lower than salary above the personal allowance
- Required: registered office address, at least one director, annual accounts