Most accountants stick to the basics of business finances, but consulting comes with its own challenges that many do not fully understand. You end up juggling irregular income, several contracts at once, IR35 risk with every contract, and figuring out whether you should operate as a limited company or a sole trader.
A specialist accountant for consultants does more than file your returns. He guides you on how to set up your business right from the beginning, keeps you IR35 compliant, makes sure you claim all the expenses you’re entitled to, and help you keep as much of your income as possible in a legal and efficient way.
The main financial challenges consultants face
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Challenge
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What it means for you
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IR35 on every contract
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You need to analyse each consulting contract on its own. If you get this wrong, you could face an unexpected tax bill of thousands of pounds.
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Irregular, project-based income
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Consulting fees don't arrive like a salary. You need to budget for tax payments on account and cash flow gaps between contracts.
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Choosing the right structure
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Limited company or sole trader? The answer depends on your income level, IR35 exposure, and long-term goals, and it changes as your business grows.
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Claiming allowable expenses
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Consultants often miss valid expense claims, from home office costs to professional subscriptions, simply because they do not know what they can claim.
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VAT registration and returns
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If your annual turnover passes the £90,000 VAT threshold, you must register for VAT. But even below that, voluntary registration can sometimes benefit you.
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Making Tax Digital for Income Tax (MTD ITSA) from April 2026
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From 6 April 2026, consultants earning over £50,000 must file quarterly digital updates with HMRC under Making Tax Digital for Income Tax.
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Our Consultant Accounting Services
When you work with GoForma, you have one point of contact, a dedicated consultant accountant who manages everything for you throughout the year. Here is exactly what services we provide:
Company formation and structure advice
Before you dive into your first consulting contract, you need the right structure in place. We advise you on whether to register as a sole trader or set up a limited company based on your expected income, IR35 exposure, and personal circumstances. Once you decide, we’ll handle the paperwork of registering your company with Companies House and getting you set up with HMRC. That way, you start consulting from day one without fuss or second-guessing.
Self Assessment tax returns
If you're self-employed or a company director, you must file a Self Assessment tax return every year. The deadline for online filing is 31 January (for the previous tax year ending 5 April). We prepare your return, identify every legitimate deduction, and submit it on your behalf. Plus, we nudge you with reminders ahead of time, so you never miss the deadline or scramble at the last minute.
Corporation tax
If you run a limited company, you pay Corporation Tax on your profits. We prepare your company accounts, calculate your Corporation Tax liability, and file your return with HMRC on time. We also advise on the best mix of salary and dividends to keep your tax bill as low as possible while staying within the rules.
VAT registration and quarterly returns
If your taxable turnover reaches £90,000 in any 12-month period, you need to register for VAT within 30 days. We take care of the VAT registration and help you pick the best VAT scheme for your business be it standard, flat rate, or cash accounting. Then, we prepare and file your quarterly VAT returns, keeping you compliant and penalty-free.
IR35 reviews and guidance
IR35 is a big concern if you’re a consultant in the UK. We review each of your contracts for IR35 status and advise you clearly on whether you're likely to be inside or outside. If you’re working with bigger clients, the responsibility for IR35 decisions technically falls to them, but you still need to understand your position and keep your working practices clean. We’ll help you get all this in order.
Bookkeeping and FreeAgent software
Every GoForma package includes FreeAgent accounting software at no extra cost. FreeAgent connects directly to your business bank account, so income and expenses are captured automatically. You can raise invoices, track mileage, and see exactly how much tax you owe in real time. Your accountant has access to your FreeAgent account too, which means they can catch any issues early and give practical, numbers-based advice.
Payroll and dividend planning
Most limited company consultants pay themselves through a combination of salary and dividends. The right split depends on your total income, the current tax year's allowances, and your personal circumstances. We calculate the most tax-efficient approach for you each year and process your payroll so everything goes through the correct channels with HMRC.
Year-end accounts and Confirmation Statement
Every limited company must file annual accounts and submit a Confirmation Statement to Companies House each year. We prepare your accounts, review them with you, and file everything on time. When your Confirmation Statement is due, we remind you and take care of that filing as well.
IR35 for Consultants
IR35 is a set of tax rules introduced by HMRC to prevent ‘disguised employment’, where someone works like an employee but provides services through a limited company.
If your contract falls inside IR35, you pay Income Tax and National Insurance as if you were employed. This can reduce your take home pay by around 20% to 30% compared to working outside IR35.
What happens if you're inside IR35?
If a contract is inside IR35, you pay income tax and National Insurance on a 'deemed payment' calculated from your fee income. For a consultant earning £80,000 a year, the additional tax burden of being inside IR35 compared to outside can exceed £10,000 per year. This is why a proactive IR35 review on every new contract is essential.
GoForma includes IR35 contract reviews in all consultant accounting packages. We review your contract terms, assess your working practices, and provide a clear written summary of your likely IR35 position before you sign.
Tax for Consultants: 2025/26 Rates and Key Figures
Understanding the key tax figures for 2025/26 helps you planyour income, time your invoices, and avoid unexpected bills. Here are thenumbers that matter most for UK consultants:
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Tax / threshold
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2025/26 figure
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What it means for consultants
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Personal allowance
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£12,570
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You pay no income tax on the first £12,570 of your earnings. Frozen until 2028.
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Basic rate income tax (20%)
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£12,571–£50,270
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Most consultants pay 20% on income in this band.
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Higher rate income tax (40%)
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£50,271–£125,140
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Income above £50,270 is taxed at 40%.
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Additional rate (45%)
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Above £125,140
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Applies to income above £125,140. Your personal allowance also disappears at this level.
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Corporation Tax (small profits)
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19% up to £50,000
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Most early-stage consultant limited companies pay 19% on profits.
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Corporation Tax (marginal rate)
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19–25% £50k–£250k
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A tapered rate applies between £50,000 and £250,000 profit.
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VAT registration threshold
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£90,000 turnover
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You must register for VAT once your rolling 12-month turnover exceeds £90,000.
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Dividend allowance
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£500 (2025/26)
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You can receive £500 in dividends tax-free each year outside your salary.
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Class 4 NIC (sole traders)
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8% on £12,570–£50,270
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Sole trader consultants pay Class 4 NICs on profits within this band.
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Self Assessment filing deadline
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31 January 2027
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Online deadline for the 2025/26 tax return.
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MTD for Income Tax start
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6 April 2026
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Consultants earning over £50,000 must file quarterly digital updates from this date.
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Allowable Expenses for Consultants
One of the most common ways consultants overpay tax is by not claiming all the business expenses they are entitled to. Whether you operate as a sole trader or through a limited company, claiming allowable expenses reduces your taxable profit and your tax bill.
Here are the expenses consultants most often miss, along with what you can claim:
- Home office costs
- Travel and transport
- Professional fees and subscriptions
- Technology and equipment
- Training and development
- Marketing and website
- Pension contributions
Important: Keep clear records of all expenses with receipts and invoices. HMRC can ask to see evidence of any business expense claimed. FreeAgent makes this easyas you can photograph receipts on your phone and attach them directly to transactions in the app.
Sole Trader vs Limited Company for Consultants
The most common question new consultants ask is: should I setup a limited company, or operate as a sole trader? The honest answer is that it depends on your income, your IR35 status, your clients, and your plans for the future. Here's how to think through it:
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Factor
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Sole Trader
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Limited Company
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Tax efficiency
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Pay income tax + NICs on all profits. Less efficient above ~£40,000/year.
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Pay Corporation Tax on profits, then take salary + dividends. More tax-efficient above ~£40,000/year.
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IR35 risk
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No IR35 exposure - sole traders are not subject to IR35.
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Each contract must be assessed for IR35. Risk of inside-IR35 determination.
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Admin and compliance
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Simple, just Self Assessment once a year.
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More admin: annual accounts, corporation tax, Confirmation Statement, payroll.
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Client perception
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Some larger clients prefer working with limited companies.
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Seen as more established and professional by many enterprise clients.
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Limited liability
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You are personally liable for business debts.
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Your personal assets are protected from business liabilities.
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Best for
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New consultants with low income, or those entirely inside IR35.
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Most established consultants earning over £40,000/year with outside-IR35 contracts.
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Not sure which is right for you? GoForma offers a free review of your business status as part of every initial consultation. We'll walk through your income, contracts, and plans and give you a clear recommendation.
Ready to Work with an Accountant Who Understands Consulting?
Hundreds of UK consultants across IT, management, strategy, engineering, healthcare, and finance trust GoForma to handle their accounting, so they can focus on earning. If you are paying too much tax, dealing with IR35 issues, or tired of impersonal online services, we are here to help.
Getting started takes less than 30 minutes. Your first consultation is free, there is no obligation, and you are not tied into a long-term contract. Get started now!
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