Contractors: Setting Up a Limited Company is not "Tax Efficient"

Over the last few months I've made the transition from full-time employment, to self-employment, and finally to working through my own limited company. If nothing else, this should make my next tax return particularly interesting.

Forming a limited company to invoice through is fairly common practice for contractors, not least because there is a perception that it's more tax efficient to do so. In fact it's more than a perception: it's a widely-held belief, which is repeated time and time again. It's also completely and utterly untrue.

Let's get this straight: for the average contractor there are absolutely no tax savings to be made by forming a limited company.