A limited company is a separate entity to you which requires its all legal formalities to operate in a separate manner. A limited company owner is a person who cannot be the company as a sole trader. There are some complexities and limitations attached to the formation and management of a limited company. This blog is all about the guide to know how to get paid as a limited company for contractors. Let’s get the idea of a limited company in detail.


Understanding a Limited Company


A limited company is a separate thing from you. You cannot be your business and need to get hired in the company to earn from it. Forming a limited company and tax filing is much more complicated than a sole trader business.

Paying Options as a Limited Company

In a limited company, there are two ways that you can pay yourself and the methods are also related to tax payments. As a sole trader, you cannot just take money when you want in a limited company. A business bank account and an official company’s online payment account is necessary to continue operating in a limited company. According to London accountants, if you want to have financially flexible business ownership then the limited company is not your cup of tea.


There are two ways that you can pay yourself in a limited company are salary and dividends.

Paying by Salary

You get employed in your company and your company becomes your employer. You as an employer pay yourself as an employee. Whether you are a director or a shareholder, the payments are all tax-induced. For a wider knowledge about being paid by salary, you should gain the consultancy by professional accountants in London.


As a sole trader, there is no concept of salary and it’s not tax-deductible but in a limited company, your salary is tax-deductible. You use the PAYE accountants method for payroll or you can hire cheap accountants in London to manage the payroll system for you.

Paying as Dividends

It’s the other way to pay yourself as dividends. Normally this type of payment option is for shareholders and you as a shareholder in a limited company can pay you in dividends. This is to be noted that the dividends must be taken from post-tax profits. It means that all the amounts for dividends should be taken after the company pays the taxes on the profits.


Deciding how to Get Paid

This can be tricky but you can get it through by using the services from the accountants for small business. They can guide you better by explaining the benefits and side effects of both the processes.


Tax Payments

Tax payments in a limited company are more complicated than in a sole trader business. For sole trader accountants in London, they only have to keep the knowledge of a single tax payment while a limited company has a lot of things to keep in the account.