Limited company - tax benefits

Bradyboo

I am going back to work for a 3month contract (£170 a day) and have to choose if I go with an umbrella company or set myself up as a limited company. My husband works full time and I have 2 small children who will need childcare so want the most tax effective solution. Could anyone please offer any advice?
Many Thanks.

Pennywise

Bradyboo wrote: »

I am going back to work for a 3month contract (£170 a day) and have to choose if I go with an umbrella company or set myself up as a limited company. My husband works full time and I have 2 small children who will need childcare so want the most tax effective solution. Could anyone please offer any advice?
Many Thanks.

For just three months, I can't see how you can justify the costs and hassle of your own limited company. I think you'd be best with an umbrella. BUT it does depend on other factors, such as what you'll be doing after 3 months, i.e. whether you'll be hoping for another contract, or getting a job, or staying at home. You also have to compare the costs of the umbrella against the costs of an accountant to deal with your limited company and set against the benefits of Ltd, i.e. potentially VAT benefits, claiming more costs, avoiding NIC, etc.

Far too many variable factors to give a definitive answer.

What I would say if you were thinking of going LTD is to make sure you appreciate the formalities, hassles etc that you have to attend to, i.e. payroll, abbreviated accounts and annual returns to companies house, full statutory accounts prep for HMRC, procedures for paying yourself wages as opposed to dividends, etc etc. Far too many people take the cheap and easy option to form a LTD and then regret it when they realise they can't cope themselves and need to spend several hundred pounds for an accountant, and risk huge fines for not meeting return deadlines etc.

moneysaverboy

Would it need to be an Ltd company or could you just register as a sole trader which is much easier to do, and then sell your services to this company @ £170 per day (this way you don't need special bank accounts or whatever, they can just pay you, but you'd be liable for paying your own tax/ni.

Pennywise

moneysaverboy wrote: »

Would it need to be an Ltd company or could you just register as a sole trader which is much easier to do, and then sell your services to this company @ £170 per day (this way you don't need special bank accounts or whatever, they can just pay you, but you'd be liable for paying your own tax/ni.

Yes if they'll let you. Your first post asked whether you should go through an umbrella or your own limited - that implies you didn't have the choice to be a sole trader. Most firms/agencies will insist on umbrella or limited - if they'll let you be a sole trader, then that's fine.