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PSCs Explained

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 an arrangement with the following characteristics:

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 National Insurance contributions (NICs) and attract a much lower rate of income tax compared to the higher rate tax bands. Below is a brief overview of the advantages and disadvantages of setting up your own PSC.

Advantages

Disadvantages

Further reading

Setting up a limited company in 3 simple steps
High street accountants struggle with IR35
Limited company contractors face business name restrictions