YF AccountingLast updated: 25 September 2026
12 min read
A contractor or freelancer needs four things from an accountant in 2026/27: the right structure for the way you work (sole trader, your own limited company or an umbrella), IR35 handled honestly on every contract, the year’s filings and pay planning done without you chasing, and a fixed fee, which for a limited company contractor should sit between £50 and £150 a month with your personal tax return included. Everything else is either a nice extra or a sales pitch.
The contractor accounting market is noisy: apps, “IR35 guaranteed” promises, bundled insurance and a lot of jargon. This is the checklist we would give a friend who has just landed a day-rate contract or gone freelance. It covers what an accountant should actually do for you, what to be wary of, what a fair fee looks like and how to get started. Where we have already explained a subject in depth, we link to it rather than repeat it.
Contractor, freelancer or umbrella employee? It changes what you need
The words get used interchangeably, but for tax there are three different set-ups, and each one needs something different from an accountant.
| How you work | How you are taxed in 2026/27 | What you need from an accountant |
|---|---|---|
| Freelancer as a sole trader | Income tax at 20%, 40% and 45% above the £12,570 personal allowance, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above. One Self Assessment return a year, plus quarterly Making Tax Digital updates once your qualifying income passes the threshold (£50,000 now, £30,000 from April 2027 and £20,000 from April 2028) | Self Assessment, an expenses review, Making Tax Digital when it applies, and a straight answer on when a limited company would pay |
| Contractor through your own limited company | Corporation tax at 19% on profits up to £50,000, rising to 25% above £250,000 with marginal relief in between. You then pay yourself a salary and dividends, with dividends taxed at 10.75%, 35.75% or 39.35% above the £500 dividend allowance | Company accounts and the CT600, director payroll, dividend paperwork, VAT if registered, your personal return, IR35 support and a pay plan reviewed every year |
| Contractor through an umbrella company | You are the umbrella’s employee. Income tax and National Insurance come off each payslip, and the employer’s costs come out of the assignment rate before you see it | Usually nothing for the umbrella work itself. A Self Assessment return only if you have other income, and someone to check the payslip deductions are right |
Most people searching for a contractor accountant are in the middle row, so that is where the rest of this article concentrates. If you are a freelancer weighing up whether to bother with an accountant at all, our honest answer for sole traders is in Do I need an accountant as a sole trader? If you are torn between the first two rows, sole trader vs limited company runs the 2026/27 numbers.
1. A structure decision that gets revisited, not made once
The biggest single tax decision a contractor makes is how to trade, and it is not a one-off. A limited company is worth more the higher your day rate, the more of your contracts sit outside IR35, and the more profit you can afford to leave in the company or pay into a pension. It is worth less if most of your work is inside IR35, because that income is taxed like employment whichever route it takes, so many inside-IR35 contractors use an umbrella for those contracts and keep the company for the outside ones.
A good accountant runs your numbers both ways before you set anything up, and runs them again when a contract changes. That is also why “just form a company” is poor advice on day one: incorporation costs £100 at Companies House, brings a £50 confirmation statement every year and a set of filings that do not stop while you are between contracts.
2. IR35 handled honestly
This is where contractor accountants most often overpromise. No accountant can guarantee that a contract is outside IR35, because status depends on the actual working relationship, contract by contract, and is judged on control, substitution and mutuality of obligation rather than on what the paperwork says. Our IR35 guide explains the tests and the tax difference, which on £88,000 of fees comes to roughly £4,000 to £5,000 a year.
What an accountant should do is make sure the process is right. Who decides depends on your client. Public sector bodies and medium or large private clients must decide and give you a status determination statement, and if you are inside, the fee-payer deducts tax and National Insurance before paying your company. With a small private client the decision, and the risk, sit with your own company. A client counts as small unless it meets at least two of three tests: turnover above £15 million, a balance sheet above £7.5 million and more than 50 employees. Those thresholds rose in April 2025, and because size is tested on past accounts, the change starts handing decisions back to contractors from the 2027/28 tax year.
HMRC’s free Check Employment Status for Tax tool gives you HMRC’s own view, and HMRC says it will stand by the result as long as the answers were accurate. Keep a copy. For a borderline or high-value contract, pay an insured IR35 specialist for a formal review. Then let your accountant handle the accounting that follows, whichever way the contract falls. That is exactly how our contractor accountant service works. We do not sell status opinions. We make sure the tax that follows the decision is right.
3. The year run for you, not by you
A limited company contractor has a filing calendar that runs all year, and most of it carries an automatic penalty if missed. This is what your accountant should be doing in the background:
| What | When |
|---|---|
| Payroll submission to HMRC for your director’s salary | On or before each payday |
| VAT return and payment, if registered | One month and seven days after each quarter end |
| P60 for your salary | By 31 May |
| P11D, if the company provides benefits | By 6 July, with Class 1A National Insurance paid by 22 July |
| Personal Self Assessment return and payment | By 31 January after the tax year, with payments on account on 31 January and 31 July once your bill passes £1,000 |
| Corporation tax payment | Nine months and one day after your company year end |
| Annual accounts to Companies House | Nine months after your company year end (21 months after incorporation for the first set) |
| Company tax return (CT600) to HMRC | Twelve months after your company year end |
| Confirmation statement | Every 12 months, £50 fee |
| Dividend vouchers and board minutes | Each time a dividend is declared |
Add the director identity verification that Companies House now requires at your next confirmation statement, covered in our identity verification guide, and it becomes clear why “I will just do it myself” rarely survives a busy contract. The other half of this job is telling you what you owe months before the deadline, so the corporation tax and the January bill are sitting in a savings account rather than arriving as a surprise.
4. Pay planning that changes with the rules
How you take money out of the company is where an accountant earns the fee for an outside-IR35 contractor. For 2026/27 the moving parts are a salary around the £12,570 personal allowance (employer’s National Insurance at 15% applies above £5,000, and a company that only pays its sole director cannot claim the Employment Allowance to offset it), dividends at 10.75% within the basic rate band and 35.75% above it, employer pension contributions of up to £60,000 a year that come straight off the corporation tax bill, and keeping your personal income under £100,000 where you can, because the personal allowance starts to disappear above it. Our salary vs dividends and company pension contributions guides have the worked examples. The point is that the right mix moved when dividend rates rose in April 2026, and it will move again. Your accountant should review it every year, not set it once.
Expenses contractors get wrong
Two rules trip contractors up more than any others. First, travel to a client site is only claimable while the site counts as a temporary workplace. Once you have spent, or expect to spend, more than 24 months there for 40% or more of your working time, it becomes a permanent workplace and the journey is ordinary commuting. Second, the company can pay you 55p a mile for the first 10,000 business miles in your own car and 25p a mile after that, but only for journeys that pass the first rule. Beyond those, the usual list applies: equipment, software, professional subscriptions, training that keeps existing skills current, insurance, a home office allowance, accountancy fees and pension contributions. Our allowable expenses for limited companies guide has the full list and the claims HMRC rejects.
VAT and the Flat Rate Scheme
You must register for VAT once your taxable turnover passes £90,000 in any rolling 12 months, within 30 days of the end of the month you cross it. A contractor billing £400 a day gets there after about 225 billed days, which is less than a year for many full-time contractors. Plenty register earlier by choice because their clients are VAT registered anyway and it lets the company reclaim VAT on its own costs. Our guide to registering for VAT covers the timing.
The Flat Rate Scheme was once a small earner for contractors, but if your company spends less than 2% of its turnover (or under £1,000 a year) on goods, it counts as a limited cost business and pays a flat 16.5% of VAT-inclusive turnover, which is usually more than it would hand over under normal VAT accounting. Most IT and consultancy contractors now fall into that category, so an accountant who still pushes the scheme without checking is a warning sign. Where it does still work, the sector rate for computer and IT consultancy is 14.5%, with a 1% discount in your first year of registration. Our Flat Rate Scheme guide goes through the maths.
What you do not need
- A “contractor-only” firm. Contractor accounting is limited company accounting plus IR35 awareness. Any competent small business accountant who deals with IR35 regularly can do it. You are paying for judgement, not a brand.
- IR35 promises. Anyone guaranteeing an outside determination, or bundling “IR35 insurance” you did not ask for into the fee, is selling rather than advising.
- Hourly billing. A question about a new contract should not generate an invoice. Fixed fees exist precisely so that you can ask.
- A separate bookkeeper. A contractor with one or two clients a month needs a bank feed into Xero or QuickBooks and a receipts app, not a bookkeeping service on top of the accounting fee. Our Xero vs QuickBooks vs FreeAgent comparison helps you pick.
- Long tie-ins or exit fees. Switching accountants takes one email, and a firm that makes leaving painful is telling you something about staying.
What it should cost
UK firms typically charge limited company contractors £80 to £150 a month, and sole trader freelancers £25 to £60 a month, as set out in our guide to accountant costs in 2026. At YF Accounting the limited company contractor package is a fixed fee from £50 a month, covering year end accounts, the corporation tax return, director payroll, dividend paperwork and your personal Self Assessment return, with VAT returns added only if you are registered. Sole trader freelancers start at £35 a month. Every fee is published on our pricing page and agreed in writing before any work starts.
When comparing quotes, check three things: whether your personal tax return is included or charged as an extra, whether there are set-up, software or “onboarding” fees on top, and what happens to the fee when you are between contracts.
Working with YF Accounting as a contractor or freelancer
Our contractor accountant service runs your limited company end to end for one fixed monthly fee, and our Self Assessment service does the same for freelancers. You deal with one person, Yoni Finke FCCA, from the first call onwards, and unlimited support is included, so a new contract, a rate change or an umbrella-versus-limited question is a phone call rather than an invoice. Mid-contract switches are routine: switching takes one email and we handle the handover with your old accountant, including the HMRC and Companies House authorisations. Fully digital, Manchester based, and looking after contractors across the UK. The wider picture for company directors is in our limited company accounting guide.
Frequently asked questions
Do I need an accountant as a contractor?
If you contract through your own limited company, in practice yes. The company must file accounts, a CT600, a confirmation statement and payroll submissions to fixed deadlines with automatic penalties, on top of your own tax return, and the planning between salary, dividends and pension is where most of the tax saving sits. If you work through an umbrella company you are an employee, and you only need an accountant if you have other income to report. Sole trader freelancers sit in between: our sole trader guide gives an honest answer on when doing it yourself works.
Can my accountant tell me whether my contract is inside or outside IR35?
Not as a guarantee, and you should be wary of anyone who says otherwise. Status depends on the real working relationship on each contract and, for medium and large clients, the decision belongs to the client anyway. What an accountant can do is walk you through HMRC’s CEST tool, point you to an insured specialist for a formal review on borderline contracts, and make sure the tax and payroll that follow are right whichever way the contract falls.
Should I use an umbrella company or my own limited company?
If most of your contracts are outside IR35 and your day rate is healthy, a limited company usually leaves you with more, especially once pension contributions and retained profit are in the mix. If most of your work is inside IR35, an umbrella is simpler and the tax outcome is broadly the same, though check the assignment rate carefully, because employer’s National Insurance and the umbrella’s margin come out of it before you are paid. Since 6 April 2026 the agency or end client has been responsible for making sure the umbrella operates PAYE correctly. Many contractors keep a company for outside work and use an umbrella for inside contracts, and we run the numbers both ways on a free call.
What expenses can a contractor claim through a limited company?
Anything spent wholly and exclusively for the business: equipment, software, professional subscriptions, insurance, training that maintains existing skills, accountancy fees, employer pension contributions and a home office allowance. Travel to a client site is claimable only while it is a temporary workplace, which ends once you expect to be there for more than 24 months for 40% or more of your time, and mileage in your own car is paid at 55p for the first 10,000 miles and 25p after that. Our allowable expenses guide has the full list.
What does YF Accounting charge contractors, and can I switch mid-contract?
Limited company contractors start at £50 a month fixed, including your personal Self Assessment return, with VAT returns added only if you are registered, and sole trader freelancers start at £35 a month. Switching mid-contract is routine: one email to your old accountant, one authorisation for HMRC, and we take it from there with no gap in your filings. The package details are on our contractor accountant page, and every fee is on the pricing page.
If you have just landed a contract, or you are paying a contractor accountant and not sure what you get for it, a free call is the quickest way to find out. Tell us your day rate, your client and how the contract looks, and we will tell you plainly which structure fits and what it will cost. YF Accounting works on fixed fees agreed before any work starts: sole traders from £35 a month, limited companies from £50 a month and growing businesses from £200 a month, with one point of contact and unlimited support included. Book a free call, phone 0161 531 0959, or compare plans on our pricing page.
Founder of YF Accounting, a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.
Related reading
Register for Self Assessment by 5 October 2026: Last Call for 2025/26
How to Switch Accountants in the UK: It Takes One Email
How Much Does an Accountant Cost in the UK in 2026?This article is part of our Limited Company Tax guide. See the full topic for related reads.