Consulting from Watford and the commuter towns
Watford suits independent consultants well. Watford Junction has fast trains into London Euston, the quickest in around 16 minutes, so a client meeting in the City or the West End is easy, and you are still home for the evening. Closer to home there are flexible offices on Clarendon Road, about 500 metres from the station, and at Croxley Park on the edge of town.
Plenty of independent consultants in this part of Hertfordshire live in Rickmansworth, Radlett, Bushey or St Albans and work mostly from a home office, with a client site one or two days a week. Their work ranges from management and IT consulting to HR, marketing, engineering and finance advice. What they need from accountants for consultants in Watford is clear, practical advice that fits the way they actually work.
Setting up your consultancy the right way
Most consultants trade either as a sole trader or through their own limited company. A sole trader setup is simpler and cheaper to run. A company keeps your business finances separate, pays corporation tax on its profits at 19% up to £50,000 and 25% above £250,000, with marginal relief in between, and gives more choice over when and how you take money out.
Some larger clients will only engage consultants who work through a company. Others are happy either way. We look at your expected profit, your clients and your plans before recommending a structure, and we explain the extra filing a company brings so there are no surprises.
What is included
- Limited company accounts and corporation tax returns
- Director payroll and dividend paperwork
- Personal tax returns for directors and sole traders
- Reviewing contracts and day to day working for IR35
- VAT registration, returns and scheme advice
- Director loan account monitoring
- Tax planning for salary, dividends and pensions
- Cloud bookkeeping setup
IR35 and accountants for consultants
IR35, the rules that decide whether a worker using their own company should be taxed like an employee, affects some consultants and not others. A consultant who advises several clients, sets their own methods and delivers defined pieces of work will often be outside the rules. One who works for a single client for a long time, alongside staff and under their direction, may look more like an employee.
If your client is a medium or large business, or a public body, the client decides your status and must give you a status determination statement explaining why. If you disagree, the client must respond within 45 days. For small private sector clients, your own company makes the decision. Experienced accountants for consultants will review your contracts and working practices, not just the paperwork, because HMRC looks at what really happens.
Paying yourself from your company
Company directors usually take a mix of salary and dividends. Salary is a cost of the company and goes through payroll. Dividends are paid from profits after corporation tax, and the first £500 of dividend income each year is tax free. Above that, dividend tax depends on your other income.
If you take money out that is neither salary nor dividend, it goes on a director's loan account. An overdrawn loan still unpaid 9 months after the company year end triggers a temporary tax charge on the company, so we keep an eye on the balance through the year. If your income goes above £100,000, your personal allowance starts to shrink, and pension contributions are one of the ways we look at to manage that.
VAT for consultants with UK and overseas clients
VAT registration becomes compulsory when taxable turnover over any rolling 12 months passes £90,000. Many consultants pass this within a year or two. If most of your clients are VAT registered businesses, registering early is often painless because they can reclaim the VAT you charge.
The flat rate scheme lets you pay a fixed percentage of turnover instead of working out VAT on every cost, but consultants with very few purchases are usually limited cost traders and pay a higher rate, which often wipes out any benefit. Advice given to business clients outside the UK is usually outside the scope of UK VAT, but you still need the right wording on the invoice and evidence that the client is a business.
We also keep track of the VAT quarters alongside your corporation tax and personal tax dates, so a consultant who invoices in large lumps is not caught out by three bills landing in the same month. The VAT return and payment are normally due one month and seven days after the end of each quarter.
Travel, home office and everyday costs
Travel to a client's office for a short project can often be claimed, along with train fares from Watford Junction to London meetings, professional subscriptions, insurance, software and a fair share of home office costs. On an engagement that falls inside IR35, the rules on travel are tighter and ordinary commuting to that client cannot be claimed.
Accountants for consultants should make the admin light. We agree a simple monthly routine for receipts and invoices, so your books are always current and you know roughly what tax to set aside.
Who this suits
- Management and IT consultants with their own company
- Interim managers moving between contracts
- Specialist advisers working with overseas clients
- Employees leaving a corporate role to consult
- Consultants in Rickmansworth, Radlett and St Albans working from home
Common questions
Should a consultant be a sole trader or a limited company?
It depends on your profit, your clients and how much you need to draw. A company can be more tax efficient at higher profits and some clients insist on it, but it costs more to run. We compare both with your real figures.
Who decides if my consulting contract is inside IR35?
For medium and large clients and public bodies, the client decides and must give you a status determination statement. Where the client is a small private business, the decision falls to your own company. Either way, we can review the contract and how the work is done.
Do I charge VAT to a client based abroad?
Advice supplied to a business client outside the UK is usually outside the scope of UK VAT. You still need to keep evidence that the client is in business and show the correct wording on your invoice. Sales to private individuals abroad can follow different rules.
Is the VAT flat rate scheme worth it for a consultant?
Often not. Most consultants spend little on goods, so they count as limited cost traders and pay a higher flat rate. We work out whether the scheme saves you anything before you join.
Can I claim my train fare from Watford to London?
Travel to a temporary place of work for a client can usually be claimed. Regular travel to the same client on an engagement inside IR35 is treated as commuting and cannot. We look at your pattern of work to decide.
I am leaving my job to consult. What should I do first?
Decide on your structure, open a separate business bank account and register with HMRC in good time. Talk to us before you sign your first contract, so the paperwork and invoices are right from the start.
How much should I set aside for tax as a consultant?
It depends on your structure and profit, so there is no single figure. We give you a working estimate each quarter based on your actual results, and a reminder before each payment is due.