Accounting for contractors brings together three decisions: how you work, how your contract is taxed and which business costs you can claim. For IT professionals running a limited company, those decisions affect payroll, company profits and personal income. This guide explains the practical steps for 2026–27. For the service itself, explore AccTek’s IT contractor accountancy service.
A contractor accountant helps manage company accounts, tax returns, payroll and records, while explaining how contracts and payment choices affect tax. The agreed engagement determines the scope; this is general information, not individual advice.
For a limited company, the routine work can include annual accounts, the Company Tax Return and CT600, VAT returns where registered, payroll submissions and benefits reporting where required. Your personal Self Assessment is a separate job: check whether the fee covers it. Ask who handles bookkeeping, software subscriptions and Companies House filings too.
Useful support also happens during the year. Before taking a dividend, you need reliable figures for available profits. Before signing a new contract, you need to understand who assesses employment status. Before a quiet period, you need enough cash for company liabilities as well as your own living costs.
Keep invoices, receipts, bank transactions and payroll records current. A monthly review of unpaid invoices, tax reserves and upcoming filing dates gives your accountant a better basis for advice. If your business has grown or your working arrangements have changed, review the service scope rather than assuming last year’s package still fits.
IR35 concerns work supplied through an intermediary, such as your own company, where the relationship would be employment if you worked directly for the client. Status depends on the engagement, not simply your job title or company registration. Seek contract-specific advice.
For public-sector clients and medium or large private-sector clients, the client normally determines status and provides a Status Determination Statement with reasons. An agency may be the fee-payer responsible for deductions; that does not automatically make it the status decision-maker. For small private-sector clients, responsibility generally remains with your intermediary. See HMRC’s off-payroll working guidance.
Inside-IR35 payments are subject to employment-tax treatment under the applicable rules. Your company may still have accounts and filing obligations. Outside IR35, ordinary company-tax and remuneration rules apply; the label does not make every payment tax-free.
Keep the signed contract, any determination and evidence of actual working arrangements. Record who controls delivery, how substitution would work in practice and any changes during the engagement. A clause alone is not a guarantee of status. Ask for a review when a renewal changes responsibilities or working practices. Speak to an accountant for advice specific to your contract and circumstances.
Company tax and personal tax are separate calculations. A company’s bank balance is not the amount its director can safely withdraw. The following figures provide context, not a recommended salary or extraction plan.
The small profits rate is 19% for qualifying profits up to £50,000. The main rate is 25%, with Marginal Relief potentially available between £50,000 and £250,000. These limits reduce for short accounting periods and associated companies. Marginal Relief does not mean a flat 26.5% tax rate on all profits. Check HMRC’s Corporation Tax rates against your accounting period.
For 2026–27, the standard Personal Allowance is £12,570. With a full allowance, the usual higher-rate starting point in England, Wales and Northern Ireland is income above £50,270. The allowance reduces when adjusted net income exceeds £100,000. Scotland has different bands for non-savings, non-dividend income. See Income Tax rates and allowances.
The dividend allowance is £500. Above available allowances, dividend rates are 10.75%, 35.75% and 39.35%, depending on the tax band. The basic and higher dividend rates rose by two percentage points from 6 April 2026. Dividends also count when assessing your income band. See HMRC’s dividend guidance.
Dividends require available profits and proper paperwork; they are not a deduction when calculating Corporation Tax. Keep board minutes and dividend vouchers. Money taken outside salary, dividends or legitimate expense repayments may be a director’s loan, with separate consequences. See taking money out of a limited company.
For an ordinary category A employee in 2026–27, employee National Insurance is 8% above the £12,570 annual primary threshold up to £50,270, then 2%. Employer National Insurance is normally 15% above the £5,000 annual secondary threshold. Directors have specific calculation rules. These are HMRC’s published payroll rates.
A salary within the Personal Allowance can therefore still create employer National Insurance. There is no universally correct salary: other income, available allowances, company profits and payroll circumstances matter. Review the combined company and personal position before changing payments.
Company expenses must meet the relevant tax rules, including the business-purpose test. A payment leaving the business account is not enough to establish deductibility. HMRC’s BIM37000 guidance explains the wholly-and-exclusively requirement for trading expenses.
For each claim, keep the receipt, date, amount and reason it relates to the business. Where a cost also benefits you personally, ask how it should be apportioned or reported. Avoid treating a checklist as automatic permission to claim every listed item.
VAT registration is normally required if taxable turnover exceeds £90,000 over the previous rolling 12 months, or you expect it to exceed £90,000 in the next 30 days alone. It is not simply a financial-year test. Special rules can apply to overseas supplies and businesses. Check VAT registration guidance.
The Flat Rate Scheme may simplify calculations for eligible businesses with VAT turnover of £150,000 or less excluding VAT when joining. It is not automatically cheaper: compare the applicable rate, input-tax treatment and limited-cost-business rules with standard VAT accounting. See HMRC’s Flat Rate Scheme guidance.
Compare written scope as well as the monthly price. Ask what is included for accounts, CT600, payroll, VAT, personal returns and software, and what happens if you need historical records corrected. Clarify response arrangements, notice periods and handover responsibilities.
For IR35, distinguish a contract review from support with a disagreement or enquiry. Ask whether working practices are reviewed, how renewals are handled and what additional work costs. A separate fee alone does not establish that another provider’s service is poor.
AccTek offers fixed monthly contractor accounting with a dedicated contact and IR35 contract reviews. Confirm your own package in the engagement terms. For a wider overview, see our UK contractor accounting service, or request a personalised quote.
Provide the contract, any status determination, details of actual working practices, company records and recent accounts or returns. Include upcoming deadlines and other income relevant to planning. This is general information; your accountant will confirm the documents needed for your circumstances.
No. Where the client is responsible, an accountant’s review can help you understand the decision and prepare evidence for a disagreement. It does not transfer the client’s statutory responsibility. This is general information; obtain advice on your specific engagement.
Potentially, but business purpose, ownership, private use and capital-allowance rules matter. Keep the invoice and discuss the treatment before assuming an immediate deduction. This is general information, not advice on a particular purchase.
It should identify the filings, bookkeeping, software, payroll and advice included, plus VAT, extra-work charges and cancellation terms. Confirm whether IR35 reviews and your personal return are covered. This is general information; your engagement letter defines the actual service.
Agree who completes each outstanding return, transfers records and handles upcoming deadlines. Check notice terms and authorisations before the handover. Switching is possible, but timing depends on your records and obligations. This is general information; arrange the transition around your circumstances.
Want a clear scope and fee for your contractor company? Get your AccTek quote.
This guide provides general information only and does not constitute tax or financial advice. Rates and thresholds checked on 8 September 2026; always verify current figures on GOV.UK and obtain advice for your circumstances.
Godwin Pinto ACA (ICAI) is the founder of AccTek and a member of ICPA, with 20+ years of experience in accounting and tax for contractors, startups and SMEs. Previously at PwC.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
