Accountant For A Limited Company

What Is a Personal Service Company (PSC)?

A personal service company (PSC) is a limited company set up by an individual, usually a contractor, to provide their services to clients. The contractor is typically the sole director and shareholder. PSCs are closely linked to IR35 legislation, which determines whether the contractor is taxed as an employee or can take dividends. This guide explains how PSCs work and the key compliance considerations.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 1

Contractor reviewing personal service company documents and IR35 status

Key takeaways

A personal service company is a limited company owned and controlled by a single contractor who provides their professional services through it rather than working directly as an employee.
IR35 rules determine whether income earned through a PSC should be taxed as employment income. If a contract falls inside IR35, the tax advantage of operating through a PSC is largely removed.
Since April 2021, medium and large private sector clients are responsible for determining IR35 status, shifting the compliance burden away from the contractor in most cases.
Operating through a PSC still offers benefits beyond tax, including limited liability protection, professional credibility and the ability to claim legitimate business expenses.

What is a Personal Service Company (PSC)?

While there isn’t a legal or formal definition of the term, personal service companies (PSC) refer to limited companies that are owned by a contractor, who is also the only shareholder and sole director. In some instances, the company may also be owned by a very small group of individuals.

Frequently asked questions

What is a personal service company?

A personal service company is a limited company where the owner is also the main worker providing services to clients. The individual is usually the sole director and shareholder. PSCs are commonly used by IT contractors, consultants and freelance professionals to invoice clients, manage expenses and structure their tax affairs more efficiently than working as a sole trader.

How does IR35 affect personal service companies?

IR35 is tax legislation designed to identify contractors who would be employees if they were not working through a PSC. If a contract is deemed inside IR35, the income must be taxed as employment income with PAYE and National Insurance deductions. Since April 2021, the end client (for medium and large businesses) determines IR35 status rather than the contractor.

What are the tax benefits of a personal service company?

When contracts fall outside IR35, PSC owners can pay themselves a low salary and take remaining profits as dividends, which are taxed at lower rates than employment income. They can also claim allowable business expenses such as travel, equipment, training and professional subscriptions. Corporation tax applies to company profits rather than personal income tax rates.

Do I need a personal service company to work as a contractor?

No, you can also work through an umbrella company or as a sole trader. However, many agencies and clients prefer or require contractors to have their own limited company. A PSC gives you more control over how you manage your income and expenses compared to an umbrella arrangement, though it comes with additional administrative responsibilities.

What are the responsibilities of running a personal service company?

You must file annual accounts and a confirmation statement with Companies House, submit a corporation tax return to HMRC, run payroll for your salary, and keep accurate financial records. If registered for VAT, quarterly returns are also required. Most PSC owners engage an accountant to handle these obligations, typically costing £100 to £150 per month.

Is a personal service company the same as a limited company?

A PSC is a standard limited company in legal terms. The term personal service company is an informal label used mainly in the context of IR35 to describe a limited company where the owner is the primary worker. There is no separate company type or registration process. You simply register a normal limited company with Companies House.

Need help with this for your business?

Book a free 20-minute call with one of our MAAT or ACCA qualified accountants. We will tell you honestly whether we can help.

203 5-star reviews

ACCA & AAT qualified

Set up in 24 hours