Is it worth setting up LTD company if Higher rate PAYE

Paul4Lena

Hi,
My wife is currently employed full-time and thanks to the shifts and overtime she does will be in the 40% higher tax bracket this year. We`re trying to save up to put a deposit on a house as we`re renting at the moment and want to settle.
She`s also been thinking of doing some other work with another company which could either be paid PAYE or to her as a Ltd company.
I`ve been looking into whether it`s more efficient to be PAYE or LTD but the advice I`ve found bandies between the two.
i`m erring on the side of PAYE as it looks like anything she`ll get as Ltd salary will be taxed at 40% and any dividends will get taxed similarly after corporation tax. It also looks like a LOT more hassle with paperwork, returns and so on.
The only thing that might sway it the other way would be if she can offset expenses such as petrol, internet usage, rent etc.
We`re not looking at massive amounts over the higher tax threshold and the contracting is expected to bring in about £5-10k a year extra.
Anyone have any experience or advice please?
Thanks.

paddyrg

Probably not worth it if the option is there and rates similar. Contractors usually work on doubling the effective day rate of a PAYE'r in order to cover the pension, holiday, sick, maternity, NI that they then have to account for themselves through their own ltd. co.

Added to this that the savings are going to be marginal (bit of NI here and there) set against the annual running costs and hassle of a limited company. Your wife's expenses could only be claimed if she wasn't going to her usual place of work (ie not commuting travel etc.) Added to this that the contract may well fall inside IR35, she may as well go PAYE *most likely*.

Wywth

Paul4Lena wrote: »

Hi,
My wife is currently employed full-time and thanks to the shifts and overtime she does will be in the 40% higher tax bracket this year. We`re trying to save up to put a deposit on a house as we`re renting at the moment and want to settle.
She`s also been thinking of doing some other work with another company which could either be paid PAYE or to her as a Ltd company.
I`ve been looking into whether it`s more efficient to be PAYE or LTD but the advice I`ve found bandies between the two.
i`m erring on the side of PAYE as it looks like anything she`ll get as Ltd salary will be taxed at 40% and any dividends will get taxed similarly after corporation tax. It also looks like a LOT more hassle with paperwork, returns and so on.
The only thing that might sway it the other way would be if she can offset expenses such as petrol, internet usage, rent etc.
We`re not looking at massive amounts over the higher tax threshold and the contracting is expected to bring in about £5-10k a year extra.
Anyone have any experience or advice please?
Thanks.

Probably not worth it.

Even if your wife is not a deemed employee by HMRC, it sounds like she will probably be caught by IR35 legislation.
Any slight benefit she may get by offsetting the reasonable costs of running a limited company will probably more than be offset by the loss of benefits she would almost certainly receive being paid PAYE.

Cornwall2000

One advantage of a Ltd company is that you can keep the money in the company after a "good" year, and pay it out in later years when you might not be in the higher tax bracket.
I run my own company including the accounts etc; and it does take a bit of organisation but I see it as extra work I'm getting paid for.

Given what I said above, I think you could probably cover an accountants fees easily with the saving you would make even on £10k though.