A recent article, by Times Online, identifies several ways for high-earners to survive in the current climate caused by the new tax regulations as outlined in the Budget. It further recommends Umbrella Companies as a particularly good option for consultants, as they can allow workers to offset travel and other expenses against tax.
Setting up your own limited company is another viable way to reduce your tax expenses, with the company tax at a significantly lower rate than the top tax, it is believed many high-earning contractors, freelancers, consultants and self-employed will be moving to limited company structures in an effort to reduce expenses and warehouse their profits. However, compared to Umbrella Companies this can result in higher costs in terms of administration, fees and time, when you can achieve the same savings by using a reputable audited Umbrella Company.
In addition to taxation at the corporate rate, benefits for contractors and freelancers creating personal-service companies include exemption from national insurance tax. Workers are however, required to prove that they are truly self-employed, which they can only do by consulting experts to understand their IR35 status; again Umbrella companies can achieve the same savings and unsure that you operate compliantly in terms of IR35 status.