Ltd co newbie - help !!

lukey105
lukey105 Posts: 39 Forumite
Name Dropper First Anniversary Combo Breaker First Post
in Cutting tax
Hi all

Thanks in advance !!

Taking a new job in June - covering maternity leave (but could well lead to permanent)

New employer suggested that I do this as a 6 month contract with them - set myself up as a ltd company and get a tax break

I can't seem to get to the bottom of exactly how this would work out better for me (£40k salary) !!??

Any help appreciated :T

Comments

  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    don't bother

    your new "employer" is trying to save a bit of tax themselves by making out that you will be an arm's length "contractor" so they won't have to pay the usual costs of employment such as employers national insurance and pension

    in the meantime you will be lumbered with the costs of establishing a company for all of 6 months and will remain exposed to HMRC challenging you for being an employee of the person you intend to work for at the end of 6 months, in other words they will see it as a sham.

    has your new employer suggested how it would answer the following questionnaire as that is what HMRC will throw at you to decide if "you" (your company) are inside or outside IR35:

    https://www.gov.uk/guidance/check-employment-status-for-tax
  • prowla
    prowla Posts: 13,156 Forumite
    Name Dropper First Anniversary First Post
    The first thing is that if you operate a limited company then whoever you do work for are customers or "clients", not employers.

    The client will not be required to pay you holiday pay, pension, tax, National Insurance, sick pay; you have to do all of that.

    You will have to invoice them for completed work and ikely they will have 30-day payment in arrears.

    You may have to take out liability insurance and also use the services of an accountant, and also (maybe) register for VAT.

    For £20k (ie. £40k salary for 6 months), it may be debatable as to how much you get out of it.

    The other thing is that the customer has no allegiance to you, so they can terminate early with no questions asked (it's just happened to me - a customer has run out of funding and so terminated a 6-month contract inside two months).

    All-in-all, I'd say that there is little to gain from taking this role on a contract basis.
  • csgohan4
    csgohan4 Posts: 10,587 Forumite
    First Anniversary First Post Name Dropper Photogenic
    Limited company is not as tax efficient as it used to be, especially with the limited of the dividends tax free amount to 2k. for 6 months only, I wouldn't bother either.
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

    G_M/ Bowlhead99 RIP
  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
    First Anniversary First Post Photogenic
    I!!!8217;d echo the advice of the above. Make them take you on as an employee or if they won!!!8217;t, use an umbrella company.
  • lukey105
    lukey105 Posts: 39 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Amazing !!! Pretty clear what to do !!
    Thanks all :j
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