That is a common misconception due to tax law changes in recent years. It used to be the case that a UK contractor paying themselves through this structure was significantly better off due to the large amount of dividend tax credits that were available.

So let me outline how this works these days as I run up against this argument a lot.

1) Any income that comes into the UK Ltd company is taxed at the corporate tax rate which as of this year is 19%.
1.1) This tax is paid on profit so if you pay yourself a normal salary out of this you will deduct this from the profits. Take note that dividends are NOT deductible from company profits before tax and as such is not a way for you to reduce your tax liability as a UK company. Dividends are only payable from after taxed money in your UK Ltd company.
1.2) Any expenses your company has in providing its services are deducted from profits. There is a misconception that you can write off A LOT of expenses but in actual fact that is not true. There are strict guide lines. Most of these expenses are also only valid if you are truly outside of IR35. Once you fall inside of it your allowed expenses decrease even more.

The above leaves you with your taxable company profit on which you pay your 19% corporation tax. (This is the tax that are being circumvented in the article by big companies.)

So now you as a UK Freelancer you now get the opportunity to pay yourself money from your UK Ltd company. You are then subjected to the following personal income tax:
1) Your tax free allowance as an individual is applied so you pay no tax on the first £11500 of income.
2) The first £5000 of dividends are also tax free. (remember this money has already been taxed at 19% in your corporation tax so is hardly free)
3) All other dividends that you then pay out to yourself are taxed as per the different tax brackets set out for personal income tax on dividends. (Again remember that 19% tax has already been paid on the this money before you can distribute it to yourself.)

So lets look at an example:
- Lets say that as a contractor you work for 10 months (42 weeks) out of the year at £500 per day. We also assume you have no problem in getting your clients to pay (a real risk in certain industries). That leaves you with 210 days that you bill at £500 per day. 210 * 500 = £105000 which is your income coming into the company before deducting allowed expenses.
- Lets now say you are not inside IR35 and you can claim travel and subsistence against this amount. That normally works out at around £500 per month of expenses you can deduct. (We assume you have already bought your equipment that you use on site etc.)
- You also need to pay your accountant, which does not work for free, the going rate in London is around £130 per month
- You now pay yourself a small salary up to the allowed personal allowance for the year of £11500

Your total corporate taxable income is now as follows:
105,000
-1,560 (Accountancy fees £130 x 12 months)
-5,000 (£500 expenses for the 10 months of billable work)
-11,500 (salary of around £958 per month for the 12 months of the financial year) =86,940 (This is the amount you pay corporation tax on) -16,518.60 (The amount of corporation tax you pay at 19% on the above £86940)
=70,421.40 (This is the amount you can now distribute to yourself in dividends)

So now your personal income tax looks as follows:
11,500 (Salary received up to tax free allowance and tax of 0%)
5,000 (Dividends with 0% tax allowance)
65,421.40 (Remaining dividends that you are taxed)
-14,136 (Tax levied on the 65,421.40 dividends that are taxable, combination of the different tax bracket rates on HMRC website.) =67,785.40 (Income you receive after tax)

So on £105,000.00 of earned income as a freelancer you end up paying £30,654.60 of income taxation (Corporation and Personal tax).

If you were a normal salaried employee you would pay £31,696.40 on £105,000 salary. (www.listentotaxman.com)

So I would argue it is hardly tax avoidance and if I take into account the risk I take as a freelancer then I am hardly working through a UK Ltd company to avoid tax. Most people still believe that the same rules of the 90's apply to UK ltd companies and freelancing but it is simply not the case.

Please do check the above with your accountant to confirm as this is not financial advise and I am not an accountant. However there are really not many options for avoiding paying tax as a UK freelancer. Keep in mind that the £5k dividend tax free allowance is also being reduced to only £2k from 2018 onward.