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  • FIRST POST
    • 2Confuddled
    • By 2Confuddled 2nd Oct 17, 5:19 PM
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    2Confuddled
    Contract via own business or umbrella company?
    • #1
    • 2nd Oct 17, 5:19 PM
    Contract via own business or umbrella company? 2nd Oct 17 at 5:19 PM
    Son is currently in his final year at university and has been offered a contract for two days a week at £125 a day. This would only run until next summer and there would be time off round his exams... so we aren't talking a huge amount of money.

    I am aware he could set up his own business which may, or may not, be useful post graduation, or there are umbrella companies... either way it seems the outgoings would probably eat up his income.

    Does anyone have experience of umbrella companies? How do you find a good one? How much is it likely to cost?

    If he went self employed, how would the costs compare. I have no idea where to start and he has even less. From what I have seen so far, I am starting to wonder if it's actually worth it.

    I am grateful for any guidance people can offer
Page 1
    • Comms69
    • By Comms69 2nd Oct 17, 5:23 PM
    • 1,318 Posts
    • 1,063 Thanks
    Comms69
    • #2
    • 2nd Oct 17, 5:23 PM
    • #2
    • 2nd Oct 17, 5:23 PM
    So he wouldn't even owe any tax?
    • 2Confuddled
    • By 2Confuddled 2nd Oct 17, 5:25 PM
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    2Confuddled
    • #3
    • 2nd Oct 17, 5:25 PM
    • #3
    • 2nd Oct 17, 5:25 PM
    No. But I assume he would need to get liability insurance and convince HMRC that he really wasn't earning enough to pay tax.
    • indianabones
    • By indianabones 2nd Oct 17, 6:19 PM
    • 193 Posts
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    indianabones
    • #4
    • 2nd Oct 17, 6:19 PM
    • #4
    • 2nd Oct 17, 6:19 PM
    Honestly for that rate of pay it simply isn't worth using an umbrella company. I would advise anyone contracting and making under £300 a day to create a limited company. Once it get's past £300 then you can start to think about an umbrella company.


    I have spoken to accountants before and they've actually advised people not to even think about umbrella unless you're absolutely raking in the money and are bone idol lazy. Him working only a handful of days a month, he should have plenty of time to do the paperwork.
    • getmore4less
    • By getmore4less 2nd Oct 17, 7:02 PM
    • 30,819 Posts
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    getmore4less
    • #5
    • 2nd Oct 17, 7:02 PM
    • #5
    • 2nd Oct 17, 7:02 PM
    Why can't they do PAYE?
    • happyandcontented
    • By happyandcontented 2nd Oct 17, 7:22 PM
    • 854 Posts
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    happyandcontented
    • #6
    • 2nd Oct 17, 7:22 PM
    • #6
    • 2nd Oct 17, 7:22 PM
    Honestly for that rate of pay it simply isn't worth using an umbrella company. I would advise anyone contracting and making under £300 a day to create a limited company. Once it get's past £300 then you can start to think about an umbrella company.


    I have spoken to accountants before and they've actually advised people not to even think about umbrella unless you're absolutely raking in the money and are bone idol lazy. Him working only a handful of days a month, he should have plenty of time to do the paperwork.
    Originally posted by indianabones
    Sorry, but I don't think that advice is correct. The more money you expect to be paid the better it would be to become a Ltd company rather than use an umbrella company. That is current advice from our Accountants.
    • 2Confuddled
    • By 2Confuddled 2nd Oct 17, 7:39 PM
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    2Confuddled
    • #7
    • 2nd Oct 17, 7:39 PM
    • #7
    • 2nd Oct 17, 7:39 PM
    Why can't they do PAYE?
    Originally posted by getmore4less
    Why can't who do PAYE? Sorry I don't understand
    Last edited by 2Confuddled; 02-10-2017 at 7:41 PM.
    • 2Confuddled
    • By 2Confuddled 2nd Oct 17, 7:40 PM
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    2Confuddled
    • #8
    • 2nd Oct 17, 7:40 PM
    • #8
    • 2nd Oct 17, 7:40 PM
    Sorry, but I don't think that advice is correct. The more money you expect to be paid the better it would be to become a Ltd company rather than use an umbrella company. That is current advice from our Accountants.
    Originally posted by happyandcontented
    So he would be better in an umbrella company?
    • getmore4less
    • By getmore4less 2nd Oct 17, 7:58 PM
    • 30,819 Posts
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    getmore4less
    • #9
    • 2nd Oct 17, 7:58 PM
    • #9
    • 2nd Oct 17, 7:58 PM
    Why can't who do PAYE? Sorry I don't understand
    Originally posted by 2Confuddled
    The real employer.

    Umbrella is just employed under PAYE with someone taking an extra cut.


    if self employed requires ltd. that may cost more short term but if long term he will be contracting for his career it may be worth setting up and getting used to operating under that scheme.
    • 2Confuddled
    • By 2Confuddled 2nd Oct 17, 8:01 PM
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    2Confuddled
    The real employer.

    Umbrella is just employed under PAYE with someone taking an extra cut.


    if self employed requires ltd. that may cost more short term but if long term he will be contracting for his career it may be worth setting up and getting used to operating under that scheme.
    Originally posted by getmore4less
    I don't know why they don't want to put him on payroll. Short term contract I suppose
    • happyandcontented
    • By happyandcontented 2nd Oct 17, 8:01 PM
    • 854 Posts
    • 1,707 Thanks
    happyandcontented
    So he would be better in an umbrella company?
    Originally posted by 2Confuddled
    It would be simpler and is usually advised if the contracting period is for a relatively short time.
    • getmore4less
    • By getmore4less 2nd Oct 17, 8:09 PM
    • 30,819 Posts
    • 18,425 Thanks
    getmore4less
    Sorry, but I don't think that advice is correct. The more money you expect to be paid the better it would be to become a Ltd company rather than use an umbrella company. That is current advice from our Accountants.
    Originally posted by happyandcontented
    The real difference is NI and expenses(limited if just one contract) tax is very similar.

    For full time(full year) accounts cost similar to umbrella margin.

    Ltd is nearly always better unless you find one that is very cheap..

    for short term where you might not stay contracting umbrella has a place if they won't just do PAYE on an equivalent rate.
    • podperson
    • By podperson 5th Oct 17, 7:30 PM
    • 3,061 Posts
    • 7,908 Thanks
    podperson
    Are they just asking him to work on a freelance basis or are they insisting that he is paid through a limited company? I do contract and freelance work but I am registered self-employed as a sole-trader. No limited company therefore no accountant/set-up fees required.

    If they do insist on a limited company then for the amount he's earning he would be better using an umbrella company.
    • isplumm
    • By isplumm 5th Oct 17, 8:44 PM
    • 1,814 Posts
    • 765 Thanks
    isplumm
    try looking at https://www.sjdaccountancy.com/ - they have guides about contracting - for example https://www.sjdaccountancy.com/about/ourservices/ltd_vs_umbrella.html

    Thanks Mark
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