Umberella Or Ltd

aayush
aayush Posts: 1,295 Forumite
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in Cutting tax
Hi

Can Some please advise which is best from the above as mostly done work as PAYE in companies but now doing temp work here and there
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Comments

  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    Umbrella is simpler (you don't have to do anything yourself) - you just get paid, but the admin fees, tax and NIC will be higher.

    Ltd is more complex, will need you to research and take responsibility for your own taxes, returns, etc., but you'll have more planning options re tax, nic etc. A decent accountant to help you with that will cost about the same as the umbrella fees.

    Ltd is best for long term contracting. Umbrella is best if it's just temporary.

    It's up to you really. If you want an easy life, go umbrella, but if you are happy to do research, look after your own taxes, etc and think you're contracting long term, then probably limited.
  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
    First Anniversary First Post Photogenic
    You'll also need to consider IR35 implications if you go down the Ltd route.
  • benedi
    benedi Posts: 3 Newbie
    Who really knows? I was told I am outside IR35 and had to join an umbrella company. I am paying about £66 a week more than my contemporaries on the same wage but they are in full time while I am agency. I don't get sick pay, nor any real holiday pay or any perks like training etc and to top it all it feels like my umbrella company is swindling me, as every week I get a different take home pay with one excuse or the other always ready when I query it.
    It just seems like the government in trying to claw back £400m in taxes have handed the umbrella companies a 'stick' to beat us with, they will never see that £400m as its going to end up in the pocket of these dodgy umbrella companies and who is suffering at the other end? Us mere mortals, as the fat cats are smiling all the way to the bank. Once again the rich getting richer at our expense. Carry on, good old Blighty!
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    benedi wrote: »
    Who really knows? I was told I am outside IR35 and had to join an umbrella company. I am paying about £66 a week more than my contemporaries on the same wage but they are in full time while I am agency. I don't get sick pay, nor any real holiday pay or any perks like training etc and to top it all it feels like my umbrella company is swindling me, as every week I get a different take home pay with one excuse or the other always ready when I query it.
    It just seems like the government in trying to claw back £400m in taxes have handed the umbrella companies a 'stick' to beat us with, they will never see that £400m as its going to end up in the pocket of these dodgy umbrella companies and who is suffering at the other end? Us mere mortals, as the fat cats are smiling all the way to the bank. Once again the rich getting richer at our expense. Carry on, good old Blighty!
    what a load of rubbish

    You are still financially better off as an umbrella "employee" than if you were a straightforward full blown employee of your employer.
  • happyandcontented
    happyandcontented Posts: 2,768 Forumite
    First Anniversary First Post I've been Money Tipped!
    Can I jump in here please? If I earned £50 per hour contracting will I pay 40% tax as I would when employed? Or would the tax breaks mean that effectively I would be better off?
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    happyandcontented wrote: »
    Can I jump in here please? If I earned £50 per hour contracting will I pay 40% tax as I would when employed? Or would the tax breaks mean that effectively I would be better off?
    patently you will pay tax at your marginal rate based on your taxable income

    the information you present above does not allow anyone to say what your actual marginal rate will be
  • happyandcontented
    happyandcontented Posts: 2,768 Forumite
    First Anniversary First Post I've been Money Tipped!
    00ec25 wrote: »
    patently you will pay tax at your marginal rate based on your taxable income

    the information you present above does not allow anyone to say what your actual marginal rate will be

    I thought that giving the hourly rate would allow a calculation to be made, but realise that I omitted to say it was 37 hours per week on a fixed two year contract.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    happyandcontented wrote: »
    I thought that giving the hourly rate would allow a calculation to be made, but realise that I omitted to say it was 37 hours per week on a fixed two year contract.
    you appear to misunderstand what an umbrella company can achieve. Perhaps read this?
    https://en.wikipedia.org/wiki/Umbrella_company

    £50 x 37 x 52 = £96,200pa

    the higher rate tax threshold (17/18) is at £45,000

    so unless you claim (concoct!) expenses to the value of £51,200, your marginal rate of tax is 40% as the PAYE calculation will assume you are going to earn £1,850 per week ad infinitum, so hugely over higher rate tax, but not quite at additional rate tax.
  • happyandcontented
    happyandcontented Posts: 2,768 Forumite
    First Anniversary First Post I've been Money Tipped!
    Again, my mistake, my question was would I pay as much tax being a contractor as I would earning the same rate as an employed person. So, would I pay 40% on as much of my income as I do currently?
  • p00hsticks
    p00hsticks Posts: 12,785 Forumite
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    happyandcontented wrote: »
    Again, my mistake, my question was would I pay as much tax being a contractor as I would earning the same rate as an employed person. So, would I pay 40% on as much of my income as I do currently?

    If you want the same personal income, then broadly speaking, yes you would.

    (if you are happy to live on less, you could set up a limited company and pay yourself less, retaining some of your earnings in the company to withdraw it at a later date. But as well as you paying tax and NI on the salary you take the company would need to pay employers NI on your salary and corporation tax on its profit, so the tax/NI savings are probably minimal)
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