Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • pocquet
    • By pocquet 2nd Oct 17, 3:49 PM
    • 10Posts
    • 1Thanks
    pocquet
    Contracting
    • #1
    • 2nd Oct 17, 3:49 PM
    Contracting 2nd Oct 17 at 3:49 PM
    Hello All,

    I am in the position to accept a role contracting as a Data Analyst for a large water company.

    The pay is Day Rates and not PAYE so I will have to submit my tax and national insurance myself.

    I have never worked as a contractor before, I have as a temp contract but paid as a PAYE.

    The company employing me asked if I had my own Limited company or an umbrella company.

    Im not 100% sure what that means and advised I will get back to them.

    I have found allot of info online but would like a solid guide.

    Do I simply save a portion of my earnings and pay via self assessment or is there something else going on here?
Page 1
    • Undervalued
    • By Undervalued 2nd Oct 17, 4:02 PM
    • 3,151 Posts
    • 2,866 Thanks
    Undervalued
    • #2
    • 2nd Oct 17, 4:02 PM
    • #2
    • 2nd Oct 17, 4:02 PM
    Hello All,

    I am in the position to accept a role contracting as a Data Analyst for a large water company.

    The pay is Day Rates and not PAYE so I will have to submit my tax and national insurance myself.

    I have never worked as a contractor before, I have as a temp contract but paid as a PAYE.

    The company employing me asked if I had my own Limited company or an umbrella company.

    Im not 100% sure what that means and advised I will get back to them.


    I have found allot of info online but would like a solid guide.

    Do I simply save a portion of my earnings and pay via self assessment or is there something else going on here?
    Originally posted by pocquet
    That is to cover themselves in case you failed to properly declare your earnings for tax and national insurance.

    The alternative is for them to deduct tax and NI on everything they pay you leaving you to claim any excess back from HMRC.

    Some will accept alternative assurances such as a letter from an accountant saying that he deals with your tax affairs or, if your turnover is high enough as a sel employed person, a VAT registration.
    • Comms69
    • By Comms69 2nd Oct 17, 4:14 PM
    • 447 Posts
    • 310 Thanks
    Comms69
    • #3
    • 2nd Oct 17, 4:14 PM
    • #3
    • 2nd Oct 17, 4:14 PM
    It doesn't sound like true self employment to be honest, but it depends on a number of factors.


    Typically putting away 25-30% + keeping a record of expenses would be a good start.
    • indianabones
    • By indianabones 2nd Oct 17, 6:26 PM
    • 184 Posts
    • 193 Thanks
    indianabones
    • #4
    • 2nd Oct 17, 6:26 PM
    • #4
    • 2nd Oct 17, 6:26 PM
    One of the better sites for information regarding contracting is SJD accountancy. I have never used them because I haven't contracted. But whenever I've thought about it and considered that I might go for it, I've gone to their website and/or called them for info.


    Basically it's simple.


    Limited = Your own company, you create business account do all the paperwork (not as difficult or time consuming as they scare you into thinking). You then get paid all of your money barring tax.


    Umbrella = A company that you are practically an employee of. They do the paperwork and take a % of your pay.


    Unless you're making a sh*tload of money, limited is the way.
    • agrinnall
    • By agrinnall 2nd Oct 17, 7:12 PM
    • 18,515 Posts
    • 14,228 Thanks
    agrinnall
    • #5
    • 2nd Oct 17, 7:12 PM
    • #5
    • 2nd Oct 17, 7:12 PM

    Unless Particularly if you're making a sh*tload of money, limited is the way.
    Originally posted by indianabones

    Corrected that for you.
    • directdebiter
    • By directdebiter 3rd Oct 17, 5:12 PM
    • 234 Posts
    • 87 Thanks
    directdebiter
    • #6
    • 3rd Oct 17, 5:12 PM
    • #6
    • 3rd Oct 17, 5:12 PM
    One of the better sites for information regarding contracting is SJD accountancy. I have never used them because I haven't contracted. But whenever I've thought about it and considered that I might go for it, I've gone to their website and/or called them for info.


    Basically it's simple.

    Limited = Your own company, you create business account do all the paperwork (not as difficult or time consuming as they scare you into thinking). You then get paid all of your money barring tax.

    Umbrella = A company that you are practically an employee of. They do the paperwork and take a % of your pay.

    Unless you're making a sh*tload of money, limited is the way.
    Originally posted by indianabones
    The above isnt quite correct. With umbrella you are an employee of the Umbrella Company. Limited Company is best if you are lively to earn over approx £30-£35k. With a Limited Company you dont do all the paperwork unless you are great at accounting and best to employer a contractor accountant. A lImited Company means greater take home pay. The OP sounds like a standard contractor and Limited V Umbrella depends on the earnings.

    I would check this out for further detail: http://www.contractoruk.com/first_timers/choosing_limited_or_umbrella.html

    HTH
    • motorguy
    • By motorguy 3rd Oct 17, 7:45 PM
    • 15,529 Posts
    • 8,889 Thanks
    motorguy
    • #7
    • 3rd Oct 17, 7:45 PM
    • #7
    • 3rd Oct 17, 7:45 PM
    If you plan on staying at contracting i cant think of any reason why you wouldnt go down the Limited Company route.

    Loads of info here

    http://forums.contractoruk.com/

    Find a good accountant too. Theres usually enough around your local town.
    You are not special. You are not a beautiful and unique snowflake.
    • motorguy
    • By motorguy 3rd Oct 17, 7:48 PM
    • 15,529 Posts
    • 8,889 Thanks
    motorguy
    • #8
    • 3rd Oct 17, 7:48 PM
    • #8
    • 3rd Oct 17, 7:48 PM
    That is to cover themselves in case you failed to properly declare your earnings for tax and national insurance.

    The alternative is for them to deduct tax and NI on everything they pay you leaving you to claim any excess back from HMRC.

    Some will accept alternative assurances such as a letter from an accountant saying that he deals with your tax affairs or, if your turnover is high enough as a sel employed person, a VAT registration.
    Originally posted by Undervalued
    I dont believe any company who want to employ an IT contractor will want to put an employee on their books, as that will make them liable for Employers NI (14% from memory) as well as holiday pay, and give you rights as an employee.

    Likewise there is most likely an agency in between who wont want the O/P going direct.

    Also it will rattle your permanent staff if you suddenly employ someone at a much higher rate.

    They will almost certainly only deal with the O/P via a LTD Co or Umbrella.
    You are not special. You are not a beautiful and unique snowflake.
    • Potbellypig
    • By Potbellypig 3rd Oct 17, 7:58 PM
    • 122 Posts
    • 56 Thanks
    Potbellypig
    • #9
    • 3rd Oct 17, 7:58 PM
    • #9
    • 3rd Oct 17, 7:58 PM
    Hello All,

    I am in the position to accept a role contracting as a Data Analyst for a large water company.

    The pay is Day Rates and not PAYE so I will have to submit my tax and national insurance myself.

    I have never worked as a contractor before, I have as a temp contract but paid as a PAYE.

    The company employing me asked if I had my own Limited company or an umbrella company.

    Im not 100% sure what that means and advised I will get back to them.

    I have found allot of info online but would like a solid guide.

    Do I simply save a portion of my earnings and pay via self assessment or is there something else going on here?
    Originally posted by pocquet
    I'm a contractor who was in the same position as you a few years ago. The first year I went with an Umbrella, and whilst it is very convenient (effectively the same as PAYE, for all intents and purposes), it also costs a lot more than the next option.

    I set up a Ltd company a year and half ago and haven't looked back. It's took a bit of getting used to but the accountant helped out a lot. You need to be a lot better with money as you'll be handling your whole invoice every month. I put 25% away every month for tax but paid a fair few % less. It has big benefits when it comes to how much more money you see every month (especially with a good accountant) but it's not hassle free. You can also put various different expenses through a Ltd company, which also helps.
    • motorguy
    • By motorguy 5th Oct 17, 10:44 AM
    • 15,529 Posts
    • 8,889 Thanks
    motorguy
    I'm a contractor who was in the same position as you a few years ago. The first year I went with an Umbrella, and whilst it is very convenient (effectively the same as PAYE, for all intents and purposes), it also costs a lot more than the next option.

    I set up a Ltd company a year and half ago and haven't looked back. It's took a bit of getting used to but the accountant helped out a lot. You need to be a lot better with money as you'll be handling your whole invoice every month. I put 25% away every month for tax but paid a fair few % less. It has big benefits when it comes to how much more money you see every month (especially with a good accountant) but it's not hassle free. You can also put various different expenses through a Ltd company, which also helps.
    Originally posted by Potbellypig
    +1

    I generally pay around 10% tax through my limited co (although i have high travel expenses of around £20,000 a year including subsistence allowances to offset against my day rate fees).

    Much more palatable than this PAYE nonsense.
    You are not special. You are not a beautiful and unique snowflake.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

329Posts Today

2,903Users online

Martin's Twitter