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Umbrella company, payroll or limited company

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I am starting a contract in January which pays a day rate and will last for a minimum of 4 1/2 months.

In the past I have always been paid through payroll but for this job I will be classed as a supplier and will have to invoice for my time.

Because it is only possibly for 4 1/2 months am I best to:
1. Set myself up as a limited company and do my own tax and NI?
2. Go through the payroll of the recruitment company that have arranged the contract for me?
3. Use one of the umbrella companies for Tax and NI. And if yes, does anyone have any recommendations on who is good?

Thanks!

Comments

  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    What will you do after this contract?

    if planning to contract longer term then Ltd may pay off as you can save NI and claim a few more expenses.

    the costs for a full year of having accounts done or pay company fees are around the same.

    for a one off the 12.8% employers NI and the margin for the payroll/umbrella may be worth less hassle.


    Make sure your day rate covers the extra costs over being an employee.

    minimum 25% extra to cover the NI and the holiday pay
  • chrismac1
    chrismac1 Posts: 2,585 Forumite
    Firstly, you are probably in a different tax situation to the "box standard" new contractor. My guess is that you have probably already had gross taxable pay of 9,940 and above in the current tax year starting 6 April 13. So the "box standard" limited company setup of 641 salary per month would not be a great help for 13-14 tax year as you'd pay 20% tax on that salary.

    IF - and it may be a big if - your contract permits, your ideal situation in my view most of the time will be to be a sole trader during the rest of the 13-14 tax year and then consider your position in April:

    1. Your fees will be lower if you need an accountant.
    2. You avoid the hassle of forming a limited company which you might not need for very long.
    3. You may have legitimate expenses which can generate a tax loss as a sole trader, which can lead to a reclaim of PAYE you've already suffered.

    Against this, you would not have limited liability as a sole trader which might be useful depending on the nature of the work. And many client companies will only operate this sort of contract if a limited company is doing the invoicing as it means that legally the limited company is your employer.

    You'll probably get a few posters worrying you in this thread about false self-employment and IR35. But for a 4 and a half month contract this all amounts to scaremongering so in practice you can ignore any such posts which follow on along those lines.

    Overall, if I were you I'd look for the lowest cost solution which creates the fewest hassles if this just ends up being 4.5 months and nothing more.
    Hideous Muddles from Right Charlies
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