Personal Service Company (PSC)

A personal service company (PSC) is a Ltd company set up to provide a single contractor's services. The contractor is typically the sole director and shareholder.

PSCs are popular among UK contractors because of the salary/dividend tax efficiency: the director takes a small salary up to the personal allowance, then extracts profits as dividends taxed at lower rates than employment income.

PSCs are the structures most affected by IR35. When IR35 applies, the tax advantages largely disappear because the contractor is taxed as a deemed employee.

Related terms

• IR35 — The UK's off-payroll working rules — they decide whether a contractor should be taxed as a deemed employee.
• Inside IR35 — An engagement that falls within IR35 — the contractor is taxed as a deemed employee.
• Outside IR35 — An engagement that doesn't fall within IR35 — the contractor can use Ltd company tax efficiency.
• Corporation Tax — Tax on company profits — 19% small profits rate up to £50k, 25% main rate above £250k, with marginal relief between.