Work as contractor - under umbrella company or limited company

You'll never be offered sole trader/self employment through an agency due to the rules/laws which make the agency liable for your tax/NIC.

If you're in it for the long term, are you aware of the new rules re public sector contracting coming in next April? Basically, the NHS will deduct tax and NIC as if you were their employee if you're basically doing a similar job in a similar way to their direct employees. So you may only have 6-9 months of the benefits of being either a limited or umbrella anyway.

Umbrella is the way if it's short term and you can't be bothered with learning/understanding how to operate your own limited company and want someone else to deal with the rules etc. A limited is the way if you're in it for the long term and are willing to learn/abide by the laws/rules. Costs are about the same for both. Tax advantages are higher with your own limited.

But if you're going limited, get a good accountant - too many traps and pitfalls for the unwary.

paddyrg wrote: »

The benefits of running your own Ltd company are negligible these days - you'll pay the same amount of tax with more responsibility, and the modest NI saving could easily be offset by the accountancy fees of around a grand a year.

Umbrella's can also easily cost several hundred pounds per year.

Benefits of Limited:-

Tax relief on travel & subsistence
Tax relief on equipment and general business overheads
VAT flat rate scheme profits

Only 7.5% tax on dividends as opposed to ~25% employers and employees NIC.

Tax relief on the grand or so accountancy fees (that you don't get relief for with an umbrella).

Can still easily be a couple of thousand pounds benefit over and above accountancy fees but only if you're in it for the long term.

Pennywise wrote: »

Umbrella's can also easily cost several hundred pounds per year.

Benefits of Limited:-

Tax relief on travel & subsistence
Tax relief on equipment and general business overheads
VAT flat rate scheme profits

I believe one can also offset expenses against tax with an Umbrella.

paddyrg wrote: »

£120 sounds high, http://hamiltonbradbury.co.uk/umbrella-company/ are £68/month, for instance. Considering your year-end accounting for a limited company is going to come in around a grand (plus taxes owed, of course), the savings might not be as great as you think, especially once you insure the company. I'm not trying to put you off, just want make sure you go in with your eyes open and don't find at the year end that you've not provisioned for a chunk of cost.

Yes I agree, £120 per month sounds very expensive (unless that includes tax & NI deducted)

With regards to accountants fees, I would also say £1k for year end accounts of a simple one man band operation is also expensive but that depends on what you ask the accountant to do, and how easy you make it for the accountant e.g by giving them the data in the format they require. So best to ask at the start of the year.

Whatever the cost, if the accountant is not saving you their fee and some, then find another accountant ... or do it yourself - it's not rocket science.

coffeehound wrote: »

I believe one can also offset expenses against tax with an Umbrella.

Yes, but a much narrower range of expenses, and in many cases, none at all. Having your own limited gives you a much broader range of expenses to reclaim, such as accountancy fees, equipment, office costs, telephone, etc.

HMRC are also changing the rules re travel/subsistence so whilst you can still usually claim for via a limited, you can't via umbrella.