SimpleReturns

Company tax returns for contractors

Reviewed by Lee Jones, Founder · Updated 16 July 2026
The short answer

The filing duty is the same for every limited company in the UK: once a year, your company must send HMRC a Company Tax Return (a form called the CT600) with a set of accounts, even in a year it made a loss. Your version of it as a contractor looks like this: every day you bill through your company is company income, the real costs of doing the work come off, and the company pays Corporation Tax on the profit that is left. The one question this trade has to keep an eye on is the set of rules called IR35, and we will be straight with you about where that question belongs.

Official source. This guide is a plain-English summary of official GOV.UK guidance, not advice. The authoritative source is Company Tax Returns on gov.uk. Always rely on that over our summary.

What counts as your company's income?

One quick signpost before we start. This page is for contractors who sell their time by the day, usually to one main client at a time, often through an agency: IT, engineering, tech and other professional contract work. If you juggle several clients at once on project fees and retainers, our guide for consultants and freelancers is the closer fit.

Every day rate you bill is company income. It does not matter whether the invoice goes to the client directly or through an agency, or whether it is built from weekly timesheets or a monthly invoice: the money lands in the company's bank account and belongs to the company first, not to you.

The good news is that Corporation Tax is not worked out on that total. It is worked out on profit: what came in, minus what it genuinely cost you to do the work. Say your company billed £84,000 across the year and spent £7,000 doing the work. The tax is worked out on the £77,000 that is left, not the £84,000.

One thing to watch as you grow: if what your company bills goes over £90,000 across any rolling 12-month period (not just your accounting year), it has to register for VAT. That is a separate job with its own rules, and if you are near the line it is worth an accountant's call.

Two rules catch people out. The return is due even in a quiet year: if HMRC has asked your company for a return, it must go in even at a loss, with nothing to pay. And filing late now costs £200 from the very first day.

What can your company claim?

One test decides it: was the money spent purely to run the business? If yes, it usually comes off the profit before tax. If a cost is partly personal, only the clear business part goes in. Here are the costs contractors genuinely have:

  • Working from home. For the days you work at home between engagements, the company can pay you a set £6 a week (£26 a month) towards the extra cost, with no receipts and no extra tax for you.
  • Equipment. A laptop, screens, a desk, a work phone: kit the company buys for the work can usually have its full cost taken off the profit in the year it was bought, up to a very high yearly limit that one-person companies never get near.
  • Software and subscriptions. Tools you pay for purely to do the work: developer licences, cloud services, security tools, a paid email service.
  • Travel between engagements. The train to a client site, a hotel if you must stay over, and food and drink on an overnight trip, plus parking and tolls. Driving your own car on a business trip is claimed at a set rate per mile (55p for the first 10,000 business miles in a year, then 25p). One caveat: a regular trip to the same usual workplace is normal commuting, and that is not claimable; travel to a temporary place of work is different.
  • Professional insurance. Cover you buy purely because of the business, such as insurance in case a client says your work caused them a loss, passes the same purely-for-business test.
  • Pension contributions. The company can pay into your pension directly, and where that payment is part of a sensible pay package for the work you actually do, it counts as a company cost and comes off the profit before tax.

Keep a record of each cost, and where something is part personal, claim only the business share.

The trap in this trade: IR35

You will hear this name at every contract renewal, so here it is plainly. There is a set of rules called off-payroll working, better known as IR35, and it applies where someone provides their services through their own company to a client that would otherwise count them as an employee.

That is the whole explanation you will get from us, on purpose. Whether a particular engagement falls inside or outside those rules is a genuine judgement about how you and your client actually work together, and getting it wrong is expensive in both directions. HMRC has a free online tool for checking employment status, and it is a sensible first look. But if any of your engagements might be inside IR35, or you are not sure, that part is honestly a job for an accountant, not for a guide and not for our software.

If your engagements sit outside those rules, nothing changes: your company bills its day rates, claims its real costs, and files the return exactly as this page describes.

What does filing look like with us?

You upload your company's bank statement and answer a few plain-English questions. We sort the year's money into the right places, apply the rules above, work out the profit and the Corporation Tax, and build both filings: the tax return for HMRC and the accounts for Companies House. You see every figure before anything is sent. It is free to start, and one payment of £99 covers both filings.

For the bigger picture of how a one-person company pays its director, our guide on company tax for contractors and freelancers covers salary, dividends and director's loans in the same plain English.

Common questions

Do I still file if my company had a quiet year with nothing to pay?

Yes. If HMRC has asked your company for a return, it must go in even in a year it made a loss, with nothing to pay. Filing late now costs £200 from the very first day.

Is my Corporation Tax worked out on everything I bill?

No. It is worked out on profit, which is what came in minus what it genuinely cost you to do the work. If your company billed £84,000 and spent £7,000 doing the work, the tax is worked out on the £77,000 that is left, not the £84,000.

What can I claim as a contractor?

Costs spent purely to run the business, such as working from home at £6 a week, equipment, software and subscriptions, business travel, professional insurance and pension contributions. Where a cost is part personal, only the clear business part goes in.

Do I need to worry about IR35?

It is the one question this trade has to keep an eye on. It applies where someone provides their services through their own company to a client that would otherwise count them as an employee. HMRC has a free tool for checking employment status, but if any engagement might be inside IR35, that part is honestly a job for an accountant.

When does my company have to register for VAT?

Once what your company bills goes over £90,000 across any rolling 12-month period, not just your accounting year. It is a separate job with its own rules, and if you are near the line it is worth an accountant's call.

Want your contractor company's return filed for you?

Upload your company's bank statement and answer a few plain-English questions. We work out the profit and the Corporation Tax, build your accounts and CT600, and show you every figure to check. Once you are happy we file both to HMRC and Companies House, and one payment of £99 covers both filings.

Start your return

And if any engagement of yours might be inside IR35, get an accountant's view on that first; we would rather say so plainly than pretend software can settle it.

General guidance, not advice. This guide explains how the rules generally work for small UK limited companies. It isn't tax advice for your specific situation, if you're unsure, check with us or an accountant.