A PSC — Personal Service Company — is the limited company most UK contractors use to provide their services to clients. If you have set up a limited company to work as a contractor, you are operating through a PSC. It is not a special legal structure. It is simply the term HMRC and the contracting industry use to describe a contractor's own limited company.
PSC stands for Personal Service Company. The term does not appear in UK company law — there is no Companies House registration category called "Personal Service Company." A PSC is simply a standard UK limited company that a contractor sets up and operates through to provide their services to clients.
HMRC uses the term informally in the context of IR35 (the off-payroll working rules). In legislation, the correct term is intermediary — but PSC has become the standard shorthand across the contracting industry.
A company is typically described as a PSC when:
This structure covers the vast majority of UK IT, engineering, finance, and professional services contractors who work through their own limited company.
Tax efficiency. A PSC allows contractors to draw income as a combination of salary and dividends. Dividends are not subject to National Insurance Contributions. For a contractor earning £80,000+, this typically results in £8,000–£15,000 more take-home pay per year compared to operating as a sole trader or through an umbrella company.
Limited liability. As a separate legal entity, the PSC protects the contractor's personal assets. Business debts and legal claims are the company's liability, not the contractor's personal liability (subject to normal director duty exceptions).
Client requirements. Many clients — particularly larger enterprises and public sector organisations — will only engage contractors through a limited company. Operating through a PSC meets this requirement.
Professional credibility. A limited company presents a more formal business identity, with a registered company number, business bank account, and the ability to issue VAT invoices.
| PSC (limited company) | Sole trader | Umbrella company | |
|---|---|---|---|
| Tax efficiency | High — salary + dividends | Moderate | Low — PAYE only |
| Limited liability | Yes | No | N/A (you're employed) |
| IR35 applies | Yes | No | No |
| Admin burden | Moderate | Low | None |
| Client flexibility | High | Limited | High |
| Take-home on £500/day | ~£55,000–£58,000/yr | ~£46,000–£49,000/yr | ~£42,000–£46,000/yr |
IR35 is the main complication of operating through a PSC. HMRC's off-payroll working rules are designed to identify contractors who work like employees but invoice through a limited company to pay less tax. If your working arrangement is deemed to be inside IR35, you lose most of the tax efficiency of the PSC structure.
The key rule since April 2021: For medium and large private sector clients (and all public sector clients), it is the client's responsibility — not the contractor's — to determine IR35 status and issue a Status Determination Statement (SDS). For small private sector clients, the PSC itself remains responsible for assessing its own IR35 status.
Being outside IR35 is the default position most contractors aim for. The three main tests are:
→ See our full guide: IR35 questions answered
Running a PSC involves ongoing compliance obligations that most contractors underestimate when they first incorporate:
Companies House filings:
HMRC filings:
Insurance:
Accounting:
Technically no — you can file your own accounts and tax returns. In practice, the vast majority of PSC contractors use an accountant because:
The question is not whether to use an accountant — it is which one. Most PSC contractors are over-served by general practice accountants who don't understand contracting, and under-served on IR35 advice, dividend planning, and contractor-specific tax strategy.
Full-service contractor accountancy — bookkeeping, VAT, payroll, corporation tax, Companies House, Self Assessment — all included. One flat fee. No surprises.
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Yes — a PSC is a standard UK limited company. There is no separate legal registration for a PSC. The term is used informally within the contracting industry and by HMRC to describe a contractor's own limited company.
No. You register a standard limited company at Companies House. There is no "PSC" registration category. Once you are operating as a contractor through your own limited company, you are by definition operating through a PSC.
Yes. A PSC can employ people. In practice, most PSCs have one employee — the contractor-director — though some also employ a spouse or partner in a legitimate support role.
No practical difference. HMRC uses "intermediary" in legislation; the industry uses "PSC." They refer to the same structure.
No. Operating through a PSC means you are not an employee of your client. You do not accrue holiday pay, sick pay, or other employment rights from the client. You are responsible for your own financial protection — income protection insurance and pension contributions are the main mechanisms PSC contractors use.
Yes, but HMRC is alert to this as a potential avoidance technique, particularly if done repeatedly to reset an IR35 compliance history. Take professional advice before doing so.