Setting up a LTD company or use of Umbrella company?

V_Debt

Im an HGV driver working for an agency and have just found out about umbrella companies.

I cant decide whether to set up a ltd company or just to use an umbrella company.

What makes me slightly uneasy is that if I set up a ltd company, then effectively, I wouldnt pay any tax for this year or next year until April 2013, then I would get hit with a tax bill from now until April 2012. This would likely be £1000s. But then I keep all my receipts for fuel etc and claim them back so I could be owed £1000s in expenses, which I think would be due to me in April 2013 also? Maybe that would offset some of the tax I owed?

The good thing about the umbrella option is that I wouldnt have to worry about a big tax bill as they do it for you every week, ie deduct tax and NI for you and offset your tax by claiming expenses.

If going self employed, when faced with a tax bill, how long do they give you to pay it?

Thanks in advance

Danny

HappyMJ

You are supposed to calculate it yourself as you go along and put the tax aside so that when the tax is due you can make the payment without having to worry about it. It's only big because it's 12 months at once. It's not really that big at all if you put 30% of your earnings aside every week/month.

I'd go with Ltd company every time but it's not suitable for everyone. Umbrella companies (in my opinion) charge very high fees for doing very little work.

InsideInsurance

Speak to an accountant, they should be able to do some quick calculations to show you the difference between the two.

If you are looking at the limited company route you need to consider salary -v- dividends and the accountant will be able to advise on this and any legal considerations that may limit what you can do on this. But as has been said, when you take money out of the company to pay yourself (or anyone else you have as a shareholder) you ensure that you leave in the company enough to pay its liabilitys such as corporation tax or VAT etc.