Effective Tax Rate Optimisation

Minimise Your Tax Bill & Maximise Your Take Home Pay

Our primary aim is to help you (legally) minimise your tax bill and maximise your take home pay through our Effective Tax Rate (ETR) Optimisation Strategy.

Operating through a Ltd Co alone will not guarantee you to minimise your tax bill. However, by operating through a Ltd Co with our support we will ensure you maximise your take home pay through our planning and implementation of a unique strategy. Our strategies are individually tailored towards each client based on their circumstances.

Our case studies below demonstrate the tangible financial benefits we have helped achieve for our clients and a general case study on the average effective tax rate across the 3 ways of working (PAYE, Umbrella Co & Ltd Co).

Rhecal effective tax rate case study

Rhecal Ltd

We helped this company reduce their ETR from 42.8% on PAYE to only 17.5% via the Ltd Co route. On a £60k income that’s a sizeable £15,180 per year!

Qualitas effective tax rate case study

Qualitas Ltd

This company benefited by 19p in the £. Their ETR was reduced from 38% via an Umbrella Co to only 19%. On a £60k income that’s a healthy £11,400 per year!

Average effective tax rate case study

Further Case Study

We have done some examples across multiple income levels as to the financial benefits of a Ltd Co vs PAYE. Find out how much you could potentially save below.

Legally Minimising your Tax Bill

Using a sample of our existing clients, we have summarised the potential ETR advantages of operating through a Ltd Co (outside of IR35) in comparison to PAYE (employment) or an Umbrella Co.

PAYE vs Ltd Co effective tax rate comparison Umbrella vs Ltd Co effective tax rate comparison

Definition of ETR (Effective Tax Rate)

Your ETR is measured as the % of tax & national insurance over your gross income. Essentially it represents the amount of tax & national insurance paid per £1 earned. So for example, an ETR of 30% represents 30p of tax & NI per £1 earned.

Why is it so much lower through a Ltd Co?

Operating your trade or contracting/freelance business through a Ltd Co is one of the few legal ways in the UK today of reducing your ETR. It is also the most common method and unlike some sophisticated tax avoidance schemes, if structured correctly is HMRC compliant.

Are there any risks?

ETR optimisation is not the only consideration you should make when thinking about operating through a Ltd Co. There are legal obligations of being a shareholder and director of your own company as well as compliance requirements. Contractors/freelancers also need to be aware of IR35 and S660 legislation.

It all sounds too complicated

For the uninitiated it normally is. However, rest assured we specialise in helping contractors/freelancers set up and operate via a Ltd Co and optimise their ETR (legally). It really is plain sailing with the right support and system we offer.

Assumptions*

  1. National Insurance is on annual basis for company directors
  2. Based on a 1 director, 2 shareholder set up (spouses)
  3. Both shareholders are Ordinary Class A shareholders
  4. Both shareholders have no other forms of income
  5. On the flat rate scheme (FRS) at a standard 14%
  6. Accountancy fees Ltd Co Gold Plus monthly package
  7. Umbrella fees can vary but for illustrative purposes have been set at the same rate as our Ltd Co Gold Plus accounting fees
  8. Outside IR35
  9. Business expenses claimed via the Umbrella Co set up is assumed at 10% of gross income

* all numbers are illustrative and based on a sample of our own clients as ETR can vary based on individual circumstances. However, on an average basis, ETR through a Ltd Co (outside IR35) is significantly lower than PAYE and an Umbrella Co.

Aidhan Accountancy

Sutherland House, 3 Lloyds Avenue, London, EC3N 3DS