Limited company for subcontracting alongside PAYE job — does this make sense?

iseeiceland

Hi all, long time lurker first time poster. Would really appreciate a sense check on this as it feels almost too good to be true.

I have a salaried PAYE job earning £30k and I've just signed a subcontract for some consulting work on the side, around £34k a year. I don't need the money day to day and would rather shelter it than take it as income.

I've been looking into setting up a limited company so I can make employer pension contributions directly into my Vanguard SIPP. My private pension is pretty much empty so far so this feels like a good time to start building it properly. The plan would be roughly:

• £15k as employer pension contribution (no corp tax, no income tax, no NI)
• Legitimate business expenses through the company
• Remainder retained in company or extracted slowly as dividends at basic rate (8.75%)

I'm on Mettle so FreeAgent is free which should handle most of the admin.

IR35 shouldn't apply as it's genuine subcontracting, not disguised employment — I've checked the HMRC CEST tool.

I also have unused pension carry forward from previous years as I've been a member of a pension scheme for a few years with very little going in, so the annual allowance shouldn't be an issue.

Does this actually stack up or am I missing something obvious? Feels like the pension angle makes it very tax efficient but I want to make sure I'm not overlooking any pitfalls before I incorporate.

Thanks in advance

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/6669980/limited-company-for-subcontracting-alongside-paye-job-does-this-make-sense

Does the company offering the consultancy work agree with the IR35 assessment?

Does your current employment allow you to have the second job?

If this is WFH consultancy work, your genuine allowable business expenses will be low.

Will you have time to do the consultancy work in addition to your employed job, given the consultancy work is fee-earning a bit more per year than your permanent job?

How many hours per week do you envisage the consultancy work to be?

What hours per week is your employed job?

flaneurs_lobster

I'd be getting myself an accountant now (not just at the year-end for the accounts sign-off) and run all this past them. They're useful for company formation too.

Any friends/family/colleagues have one they can recommend who works in this area?

Albermarle

I also have unused pension carry forward from previous years as I've been a member of a pension scheme for a few years with very little going in, so the annual allowance shouldn't be an issue.

The Annual Allowance is £60K and it looks like you will be nowhere near that, so carry forward is not relevant.

Dazed_and_C0nfused

And the 8.75% dividend tax rate no longer exists. 10.75% is the basic rate now for dividends.

SacredStephan

Does your current employment allow you to have the second job?

You should check your employment contract before proceeding. Also, would your consultancy work conflict with your employer's business?