A Personal Service Company (PSC) is a tax-efficient strategy for contractors, allowing them to save on income tax and enjoy other financial benefits by operating through a limited company. Key advantages include lower income tax rates, corporation tax savings, potential VAT savings, and the ability to claim business expenses. To set up a PSC, one must incorporate a limited company, register for taxes, open a business bank account, and establish an accounting system. While the tax savings can be significant, it's crucial to understand the responsibilities associated with running a limited company, such as ensuring tax compliance and maintaining accurate financial records.