search our site


What is a PSC?

freelancesupermarket.com resources

A Personal Service Company (PSC) is a term first used by HMRC following the introduction of IR35 in April 2000.

Although there is no clear legal definition of what exactly constitutes a PSC, in most freelancing circles it is widely regarded as the following:-

  • A UK registered limited company.
  • The contractor acts as director of the company.
  • The contractor is the sole shareholder, (sometimes split 50/50 with their spouse).
  • The contractor manages and controls the company's bank account.
  • The contractor supplies professional services to agencies / clients via the PSC.

The main benefit of a PSC is that if you can be judged to be 'self-employed' under current HMRC guidelines, then you will be able to pay yourself a small salary and get most of your income from dividends.  Dividends aren't subject to  NICs and attract a much lower rate of Income Tax compared to the higher rate tax bands.

Advantages of setting up a PSC·

  • A PSC is the most tax efficient way of working if you are outside of IR35.
  • You can claim a wider range of expenses.
  • A PSC will give you access to the flat rate VAT scheme.
  • You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator.
  • You have greater opportunity for tax planning than PAYE Umbrella.

Disadvantages of setting up a PSC·

  • Some of the paperwork can be complicated and you may need to pay an accountant to do a lot of the work for you.
  • A PSC can be costly if you contract for a very short period of time and then go back to permanent employment.
  • You will be responsible for issuing invoices, and may have to spend a lot of time chasing late payments.
  • There is a lot to set up, such as a business bank account.
  • A PSC is not ideal for contracts less than £25k per year.

We'd love you to stay in touch - why not subscribe to our updates?

To subscribe to our weekly newsletter, simply include your name and email address below. You can also follow us on Twitter, Facebook and YouTube.

freelancesupermarket.com services

showcasing freelance services


set flsm to your home page

add flsm to your favorites