Going Ltd and contracting instead?

webbo34

Hi guys,

It's my first post here although I have been reading the forums for a year or two now.

I am working as a Graphic Designer for a firm in the North West and get paid a decent wage for doing so. The problem with my job is that in order for me to get a pay rise I would need to move jobs because the company I work at is small (which I love) and are already paying me their maximum (and I know this, I've seen their accounts).

That said, one of my friends told me that I should set up a Limited company and instead of my boss paying me in the usual way, I instead invoice him every month.

My boss would pay me the same as he currently does, via invoices that I send to him from my "company". I would then pay myself dividends instead of a salary and thus be better off because currently I pay around £9,000 a year in income tax and national insurance.

You can probably tell I'm not very savvy when it comes to this but I just wondered if it was possible - is it even legal (and not seen as "tax dodging")?

I would ideally like to speak to an accountant about this but I just wanted to know if anyone had experience of or knew if it was possible.

I look forward to hearing peoples responses :T

emeraldbugle

You are best to read this

http://www.hmrc.gov.uk/employment-status/index.htm

It is important there is a clear definition of what you are doing. Will you be working for other people too? If you are just working for this company then you will be classed as an employee. If HMRC came in to do an inspection then they would be able to see that you are an employee, not a contractor.

Hope that helps.