I am not an accountant so YMMV. Also, tax rates change as they have since the question was posted. In the UK salary employees are paid each month after all taxes. Most UK citizens simply don't think about tax. When you are a freelancer you pay the tax bills yourself. As per the calculations below you may find you pay more taxes than a typical salaried employee. A newbie error is to spend the income as a dividend to then get a big personal tax bill the following year. The tax office asked me for the previous years dividend tax plus half as much again as a "payment on account" against the estimated next tax bill. Tax suddenly got very real when faced with 1.5 years of taxes. Taking out money to pay taxes attracted more taxes the next year. While you are happily living as Neo in the tax matrix today as a freelancer you will need to take the tax red pill. My estimates of the taxes are as follows. Your company will pay corporation tax. You personally will pay tax on any dividends you draw. The good news is that you get a tax allowance on the dividend you draw and the rates paid on dividends are lower than for normal salary. The bad news is that HMRC applies **both** taxes and IMHO they seemed designed to try to make you pay **at least** as much as the tax on a salary. As at 2019 the top google search result says: > The tax-free dividend allowance is £2,000. Basic-rate taxpayers pay 7.5% on dividends. Higher-rate taxpayers pay 32.5% on dividends. Additional-rate taxpayers pay 38.1% on dividends. The really bad news is that you are almost a higher-rate tax earner on your current day job. As at 2019 the higher rate tax bracket starts at £50k and is 40%. Let us assume your salary today is £50k. Any income you draw from your company as dividend will be hit at the higher-rate of 32.5%. Assume your company invoices £26k and pays 20% corporation tax that's £5.2 company tax. Then you pay £6.1 personal tax which is 32.5% on (£26*0.8)-£2k where the £2k is the dividend tax allowance. So the total tax on the invoice is £11.3k. That is an effective tax rate of 43.5% which higher than your salary tax rate of 40% that you just hit. Your company does get to keep some VAT that you pass through. As you won't have a lot of costs you will be a “limited cost trader”. Today VAT is 20% and limited cost traders forward 16.5% to HMRC. So that will be £1.6k to your company keeps. Yet it's all subject to the same taxes when you pay it as a dividend. You only pay corporation tax after expenses. For freelance developers, expenses are not as generous as people seem to think. Even if you work from home a full day you cannot expense your lunch. The money your company can pay you to use your home as an office is a pittance. If you travel to visit a client you get some expenses such as lunch and the cost of the travel but it isn't a significant amount. A business expense is still an expense; it is only before corporation tax so a 20% cheaper expense. I don't think of business expenses as a perk they simply are a cost of doing business. Your company can buy some amazing computer hardware before taxes. Yet it is a waste of money to be doing that every year. It can buy a top range company phone but the SIMM only contract its a taxable benefit. Your personal tax bill will swell to include 40% of the SIMM contract cost. That is a 60% saving over busing a personal contract from salary, but it doesn't really excite me. Also in the UK small companies don't get the huge discounts that UK consumers usually get. For example, you will pay charges for your company bank account and in the UK we are used to getting free personal-banking. IHMO really isn't as rosy as people think. YMMV. Your company can spend up to £300 a year on employee entertaining for you and your partner. So every year my wife and I enjoy a very exclusive company Christmas Party. Bizarrely your company can give you a couple of hundred pounds of gifts tax-free each year as a "thank-you" as long as it isn't performance-related. Gifts cannot be cash but they can be a few hundred pounds of Amazon vouchers. Those perks along with buying yourself your dream computer and a top company phone do make it feel like you are winning; even if it is the taxman who is having the most success. Once you take the red pill and see a few tax bills you might suddenly take a very keen interest in tax efficiency. My number one tip is *don't spend it immediately* and keep a hefty chunk of money in your company account. If you invoice £X in a month assume the worst case for taxes on that invoice and don't draw all the money from that invoice until you have settled all the taxes for that year. That might be as long eighteen months after the invoice paid at the beginning of a tax year. The most tax-efficient thing you can do is live off your main job and don’t spend the company money. The company account can then be your “rainy day” account for “life events”. If you don’t spend the money in the company there are tax-efficient things you can do. You can slap a huge sum each year into a pension tax-free until your pension pot is very large. At age 55 you can then take out a large lump sum tax-free. It reduces corporation tax and personal taxes. So the winning solution is to let the company bank account sell to about six months earnings then keep on creaming off anything above that into a pension. Then if you lose your job or need some cash in a crunch you can draw the money as dividend and suffer the taxes. If you ever lose your main job you can take out company money very efficiently. Let's say you lose your job at the last day of the tax year. You can then draw both full personal tax allowance £12.5k and the dividend allowance tax of £2k tax-free. You can then only paying 7.5% on the next £36.5k. Then you are laughing and the taxman isn't. You could quit your job and travel around the world doing freelance work and really be winning.