CIS & self-employment tax guide

At under £45,000 annual income, the tax savings from a limited company are minimal or negative after you factor in doubled accountant costs (£2,000-2,400/year vs £1,000-1,200), Companies House fees, and the administration of running a company.

The tax gap has narrowed since the old flat 19% Corporation Tax regime. Small companies now face a mix of the 19% small profits rate, marginal relief, or the 25% main rate depending on profit, so the limited-company win at this level is often much smaller than people expect.

Key action: make sure you're registered and verified (20% CIS rate), claim all allowable expenses, and file your Self Assessment on time to reclaim any CIS overpayments.

In the £45,000-60,000 range with low expenses, a limited company might save you £500-1,500 per year after accountant costs. That's not nothing, but it comes with significant extra administration: annual accounts, corporation tax returns, dividend paperwork, and Companies House filings.

Talk to a construction-specialist accountant who can run the numbers for your specific situation. The breakeven depends on your exact expenses, whether you have a partner who can be a shareholder, and how much you value simplicity.

If you go limited: use a construction-specialist accountant (not a general high-street firm), and budget £200/month for accounting fees rather than the £100/month you'd pay as a sole trader.

With £45,000-60,000 income and significant expenses, a limited company can sometimes offer tax efficiencies, but the outcome depends on profit level, dividend tax, accountant fees, and whether small-profits rate or marginal relief applies.

But check IR35 first. If you're working for one or two clients through an agency, you may be caught by IR35 rules, which means you'd be taxed as an employee regardless of your company structure. In that case, an umbrella company or staying CIS self-employed is more honest and less risky.

Get a construction-specialist accountant to model your specific numbers before committing.

Over £60,000 with multiple clients, a limited company is more likely to be worth modelling properly, but the saving is not automatic. It depends on actual company profit, dividend tax bands, accountant costs, and whether you can stay outside IR35.

Typical structure: a low salary plus dividends from post-tax company profit, with the exact split set by your accountant for the current tax year.

Budget for: accountant fees of £200-250/month, Companies House annual filing, professional indemnity insurance, and the administrative time of running a company.

IR35 rules exist to prevent "disguised employment": working full-time for one company but through a limited company to reduce tax. Since April 2021, medium and large contractors are responsible for determining your IR35 status. If they determine you're "inside IR35," you'll be taxed as an employee regardless of your company structure.

At over £60,000 with one main client, a limited company could still save you money, but only if your working arrangements genuinely look like contracting (you control how and when you work, you can send a substitute, you bear financial risk). If the client tells you when to show up, where to work, and how to do the job, you're probably inside IR35.

Get specialist advice. An IR35 determination from a specialist (not just your accountant) costs £300-500 and could save you thousands in penalties. If you're inside IR35, staying CIS self-employed is the honest and cheaper option.