CONTRACTOR & FREELANCER ACCOUNTANTS
Two things changed for contractors in April 2026, and both of them cost money if nobody tells you.The dividend ordinary and upper rates each rose by two percentage points on 6 April 2026, to 10.75% and 35.75%. At the same time, the umbrella company reforms introduced joint and several liability for PAYE: the umbrella remains the employer, but the agency contracting with the end client — or the end client where there is no agency — is jointly liable, with no reasonable-excuse defence. Agencies have responded by tightening who they will work with.
TaxDigit acts for contractors and freelancers across IT, engineering, construction, healthcare locum work and the creative sector. We handle the company, the payroll, the VAT and the personal return, and we give you a straight answer on the two questions that actually matter: which structure suits your contracts, and how much you should be taking as salary against dividends.
What we do for contractors
A complete limited-company service, priced as one fixed monthly fee.
- Company formation and registration — incorporation at Companies House including director identity verification, plus HMRC registration for every tax you actually need.
- Accounts, corporation tax and payroll — year-end accounts, the CT600, RTI payroll and auto-enrolment.
- VAT — registration, whether the Flat Rate Scheme still helps you, and quarterly filing under Making Tax Digital.
- Personal tax — your Self Assessment, the salary-dividend split modelled at current rates, and dividend paperwork that would survive an enquiry.
The questions contractors actually ask us
Most of the value is in these four decisions, not in the bookkeeping.
- Limited company or umbrella — the answer depends on your rate, your contract length and whether your engagements are inside or outside IR35.
- How to evidence outside-IR35 status properly, rather than relying on a contract template.
- What to take as salary and what as dividends, now that dividend rates have risen.
- Whether to keep profit in the company, and what that means when you eventually close it.
What changed in April 2026
Both changes are already in force. Neither was widely explained to contractors before it landed.
Dividend rates up
Ordinary rate 8.75% to 10.75%; upper rate 33.75% to 35.75%; additional rate unchanged at 39.35%. The dividend allowance remains £500. For most contractors this is a real annual cost.
Umbrella liability
The agency contracting with the end client, or the end client if there is no agency, is jointly and severally liable for the umbrella’s PAYE. Expect more scrutiny of which umbrella you use.
Companies House ID
Identity verification has been compulsory since 18 November 2025. Directors appointed before that date must supply a personal code with their next confirmation statement, and the window closes in mid-November 2026.
Who we help
- IT and technology contractors working through their own limited company.
- Engineering, energy and construction contractors, including those under CIS.
- Locum doctors, nurses and allied healthcare professionals.
- Management consultants and interim executives.
- Creative freelancers — design, film, media and marketing.
- Contractors moving between umbrella and limited company, in either direction.
Frequently asked questions
Limited company or umbrella — which is better?
Broadly: if your work is outside IR35 and your day rate is decent, a limited company almost always leaves you better off after fees. If your engagements are inside IR35, or you contract only occasionally, an umbrella is simpler and the tax difference is small. We will run the numbers on your actual rate rather than guess.
What is joint and several liability for umbrella PAYE?
From April 2026, if an umbrella company fails to pay over the PAYE it should have, HMRC can collect it from the recruitment agency that contracted with the end client — or from the end client directly where no agency is involved. The umbrella stays the legal employer. There is no reasonable-excuse defence, which is why agencies have become much more selective.
How much salary should I take from my company?
Usually enough to preserve your National Insurance record without creating an unnecessary employer NIC bill, with the balance as dividends. The right figure moved when dividend rates rose in April 2026 and depends on whether your company can claim the Employment Allowance. It is worth recalculating each year rather than carrying last year’s number forward.
Do I still need to worry about IR35?
Yes. The off-payroll rules did not go away — responsibility for determining status sits with the end client for medium and large businesses, and with you for small ones. What matters is evidence of how you actually work, not the wording of the contract alone.
Can you help me close my company down?
Yes. We deal with striking off and members’ voluntary liquidations, including whether Business Asset Disposal Relief applies. Note the BADR rate rose to 18% from 6 April 2026, so the timing of a closure now matters more than it used to.
Ready for accountancy that feels effortless?
Join the businesses and individuals who trust TaxDigit for clear advice, meticulous compliance and proactive planning.
Book Your Consultation