BBC presenters are not the only ones setting up their own companies to beat tax — growing numbers of professionals are opting out of salaried employment to become consultants and freelancers.

The Sunday Times revealed earlier this month that high-profile BBC names are using service companies to take advantage of lower income tax levied on company profits and dividend payments, compared with personal taxes.

Companies with a turnover of £300,000 or less currently pay 21% tax and are not subject to National Insurance contributions (Nics). Higher rate pay-as-you-earn taxpayers, on the other hand, pay 40% and from April next year this rises to 50% for those who earn £150,000 or more. With Nics, this rises to 51.5%.

Last week, Price Waterhouse Coopers, the accountant, reported a “groundswell of private business development in the UK”, adding that more graduates were deciding to start out on their own.

Peopleperhour.com, a website where consultants and freelancers market their services to employers, said the number of projects posted on the site had risen 200% in the past three months, while the number of people registering grew 25%.

In addition to low tax rates, the advantages of being taxed as a company rather than an employee include the ability to offset losses against any other income you have earned in the past three years. You can also claim generous reliefs available for entrepreneurs on the sale of assets owned by a business or on the disposal of shares in the company.

However, there are some big hurdles when it comes to proving self-employment. Referring to the BBC presenters who have set up companies, Mike Warburton of Grant Thornton, the accountant, said: “I anticipate they will be picked off one by one by the taxman in the months ahead.”

We offer a guide to setting up on your own within the tax rules.

What are the advantages?

The big advantage is that you can retain funds within the business at lower company tax rates. If you take money out of the business, though, there is less benefit.

For example, a full-time employee earning £150,000 will take home £92,220 after income tax and Nics from next April.

Alternatively, you could set yourself up as a company and draw £150,000. First you would pay yourself £6,475, equivalent to the personal allowance and therefore free from income tax and Nics. You would then pay corporation tax of 21% on the remaining £143,525 left in the business — leaving £113,385 that can be paid as dividends.

Dividends are taxed from April next year at a basic-rate of 10% on the first £37,400 and at 32.5% after that, so you will pay £19,931 tax, leaving £93,454 to take home. With the £6,475 you have already taken, you get £99,929 out of £150,000 earnings — £7,709 more than if you were an employee, according to figures from Grant Thornton.

Accountants also point out that if you leave money in the business, rather than take it as a dividend, you would pay capital-gains tax at 18% when the company was wound up rather than income tax. You need to keep the business going only for two years before you become eligible to wind it up.

Are there limits?

The Revenue imposes strict rules — only those who can prove they are not employees are allowed to trade as companies.

Under “IR35”, the Revenue will scrutinise the number of clients a so-called company has to determine if the worker should be paying personal tax rates on salary.

David Whiscombe of BKL, the tax adviser, said: “The Revenue will investigate companies that use a large number of sub-contractors.”

An alternative is to use umbrella companies — these do not attract a lower base rate of income tax, but workers can offset travel and other expenses that are “wholly and exclusively” for business purposes.

Any other tax perks?

Companies can also be used to split income between a husband and wife who both own shares in the company. Couples — and also grandparents and adult children — can then each apply their personal allowance to what is, in effect, one salary.

For example, say a husband and wife each own 50% shares in a firm with annual earnings of £150,000. Again, each gets a payment of £6,475 (equal to the personal allowance) free of tax and Nics, leaving £137,050 taxed at 21% company tax rate (£28,780). This leaves £108,270 or £54,135 each, which can be paid in dividends. They will be taxed at £5,119 each on this, leaving them with £49,016 each. Adding the £6,475 tax-free payment, they each keep £55,491 — or £110,982 as a couple, compared with £99,929 were the company in one name.

However, the taxman could thwart this. It has already challenged “income splitting” in a test case, but ultimately lost. While the Treasury has pledged to legislate anyway, plans to do so have been shelved.

Can I put other assets in the company?

Companies can also be used as a “wrapper” for investments. The effective rate of tax paid on investments in a company is therefore 41% — corporation tax at 28% and capital gains tax at 18%. So on £100 of income you would pay £28 income tax, then £13 on the remaining £72 — so total tax of £41.

Any eventual sale of the company will be taxed as a capital gain — but trading companies can claim entrepreneur relief so proceeds up to £1m are taxed at 10%.

How do I get started?

You must notify the taxman and Companies House of your intention to form a company. You can do this online using a company formation agent. You will also have to register for Vat in order to claim rebates on equipment, such as computers and rent.