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  • FIRST POST
    • aayush
    • By aayush 10th Jun 17, 12:17 PM
    • 648Posts
    • 24Thanks
    aayush
    Umberella Or Ltd
    • #1
    • 10th Jun 17, 12:17 PM
    Umberella Or Ltd 10th Jun 17 at 12:17 PM
    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
Page 1
    • Pennywise
    • By Pennywise 10th Jun 17, 12:39 PM
    • 9,323 Posts
    • 16,920 Thanks
    Pennywise
    • #2
    • 10th Jun 17, 12:39 PM
    • #2
    • 10th Jun 17, 12:39 PM
    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
    • By TheCyclingProgrammer 10th Jun 17, 4:15 PM
    • 2,847 Posts
    • 1,622 Thanks
    TheCyclingProgrammer
    • #3
    • 10th Jun 17, 4:15 PM
    • #3
    • 10th Jun 17, 4:15 PM
    You'll also need to consider IR35 implications if you go down the Ltd route.
    • benedi
    • By benedi 2nd Jul 17, 2:31 PM
    • 3 Posts
    • 1 Thanks
    benedi
    • #4
    • 2nd Jul 17, 2:31 PM
    • #4
    • 2nd Jul 17, 2:31 PM
    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
    • By 00ec25 2nd Jul 17, 3:19 PM
    • 5,345 Posts
    • 4,690 Thanks
    00ec25
    • #5
    • 2nd Jul 17, 3:19 PM
    • #5
    • 2nd Jul 17, 3:19 PM
    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!
    Originally posted by benedi
    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
    • By happyandcontented 2nd Jul 17, 3:27 PM
    • 827 Posts
    • 1,667 Thanks
    happyandcontented
    • #6
    • 2nd Jul 17, 3:27 PM
    • #6
    • 2nd Jul 17, 3:27 PM
    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
    • By 00ec25 2nd Jul 17, 3:29 PM
    • 5,345 Posts
    • 4,690 Thanks
    00ec25
    • #7
    • 2nd Jul 17, 3:29 PM
    • #7
    • 2nd Jul 17, 3:29 PM
    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?
    Originally posted by happyandcontented
    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
    • By happyandcontented 2nd Jul 17, 3:32 PM
    • 827 Posts
    • 1,667 Thanks
    happyandcontented
    • #8
    • 2nd Jul 17, 3:32 PM
    • #8
    • 2nd Jul 17, 3:32 PM
    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
    Originally posted by 00ec25
    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
    • By 00ec25 2nd Jul 17, 5:07 PM
    • 5,345 Posts
    • 4,690 Thanks
    00ec25
    • #9
    • 2nd Jul 17, 5:07 PM
    • #9
    • 2nd Jul 17, 5:07 PM
    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.
    Originally posted by happyandcontented
    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
    • By happyandcontented 2nd Jul 17, 8:00 PM
    • 827 Posts
    • 1,667 Thanks
    happyandcontented
    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
    • By p00hsticks 2nd Jul 17, 8:18 PM
    • 5,701 Posts
    • 5,316 Thanks
    p00hsticks
    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?
    Originally posted by happyandcontented
    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)
    • dori2o
    • By dori2o 2nd Jul 17, 11:32 PM
    • 7,338 Posts
    • 12,239 Thanks
    dori2o
    My brother has recently gone through the same issue. He's a contractor for British Gas who following an investigation by HMRC are now forcing all long term contractors into Ltd company/umbralla company routes.

    This issue is really one where you do need specialist advice and isn't one that can be dealt with via a forum.

    In the end the accountant my brother hired suggested Ltd company was the way to go, especially in his case due to travel expenses which are more of an issue now depending on the terms of engagement with your umbrella company given the change in rules for people who work via employment intermediaries from April 2016, and due to personal bad experience he's had with Umbrella companies in the past.

    it's best to fully understand them in order for you to make an informed decision given the many complications in this area, and if it were me, I would definitely seek professional one to one advice.

    In this particular area, even if there is a cost to obtaining the advice, it's a cost that it well worth it to make sure you fully understand the options available to you.

    The last thing anyone wants with this issue is to make a decision which leaves you significantly out of pocket.
    Last edited by dori2o; 02-07-2017 at 11:35 PM.
    To equate judgement and wisdom with occupation is at best . . . insulting.
    • Potbellypig
    • By Potbellypig 3rd Jul 17, 7:47 PM
    • 150 Posts
    • 68 Thanks
    Potbellypig
    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
    Originally posted by aayush
    It depends on your circumstances really. If it's just a bit of temp work, you might be better off letting some else hold the umbrella. But if it's longer than that then providing you've got someone who knows what they're doing (an accountant, generally), you'll be much better off financially as a Ltd company.

    If you are going through the Ltd company route then you'll need to pass IR35.
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