Umbrella company question - post 6 April 2007

maynard_2

Hi Guys,

I have been reading up all about these Managed service companies as I am considering going freelance (Contractor's Quantity Surveyor). I was speaking to my recruitment consultant today and he has said that obviously the tax benefits are not going to be as good now composite companies have been outlawed.

Bear with me guys, I'm new to all this tax and NIC lark... I have always been directly employed. My question is....

If I go freelance and sign up to one of these umbrella companies and my salary/expenses are as follows... how much tax/N.I will I pay?

Wages = £22p/hr * 45hr/wk = £990.00

Expenses = £90p/wk train fare, £27p/wk managed service company fee (I assume these are both tax deductable)

Will I pay normal tax and NIC on the gross wage (i.e. £990) less the expenses (£117) = £873?

I shall only be going freelance for approximately 6 months (before I go off travelling).

Any advise/personal experiences would be much appreciated. Thanks in advance.

loosechange_2

Mmm..believe it or not there is alot more to choosing the right umbrella company than you may think. I had been an IT contractor for several years and have come across numerous bad companies with a smattering of good. Before signing up to any umbrella read all their literature and pester them for answers to questions you may have.....do they deduct a %'age p/w for holiday pay, how often is money paid to my bank, how is the money paid..BACS / CHAPS, will net pay be paid in full or will they retain a proportion to keep as a 'loyalty' bonus at the end of the contract, can invoices be sent via email an is pay notification available on pay day, what happens if things go wrong...do I have an account manager.

Best advice is to shop around and get the best deal for your personal circumstances, don't be bullied or pressurised into signing up after all its your money! ( a costly mistake made by myself).

Have you considerd forming a Ltd company with a book keeper to look after your affairs? Seems daunting but is straight forward enough.

dejongj

The only 'advantage' you have using an umbrella versus normal employment is that you can claim travel expenses on a monthly basis versus doing it via your self-assement...That being you don't fall foul of the 24-month rule, of which my interpretation is that you don't know you are going to be in a contract for more than 24 months at a particular place of work....As such you should be able to claim ALL your travel expenses BEFORE paying tax over it....Also as you are young, it is worth making some pension contributions which you can also do BEFORE paying tax....

As per the previous poster, if you are outside IR35 (for example your contract stipulates you can provide a substitute, etc...) then it is definitely worthwhile going limited as you have more tax benefits....

Since I do not work for them, but I would recommend my solutions providers...I've been with them for over 7 years, they never missed a payment or a phone call...And provide both Umbrella or Ltd services, amongst many other things.... http://www.bklchart.co.uk