"Umbrella Company" and contracting.Advice please.

[ricgem2002]

if the agency aren't deducting ni, then why are they taking tax?

 

and for that matter, if the agency isn't taking ni, is he paying it on his own accord?

you tell me mate he s sick to death of it all but carries on doing the work because he cant get anything else at the moment. i suspect this will be happening more and more in this country and employers are revelling in it. the workforce of this country will be either self employed or agency workers with no job security/pensions/zero contract hours and not a chance of getting a mortgage.

[Cyclone]

Tell your mate to go Ltd though, then there's no need to involve an umbrella.

[FWDiane]

You mention the contract is only for 3 months, on the rates you mention an Umbrella Company would be best, but if you contract at that rate for a year then the savings you'll make in tax will more than make up for the extra cost in accountancy fees.

Find an accountant who is used to dealing with contractors, who can review your contract from an IR35 aspect, will give decent tax planning advice, etc. Most times imtroductory meetings are free, they can give you a comparison PAYE/Umbrella/Ltd Co and then you can make your own decision based on hard facts. All our clients are contractors/ freelancers/ consultants and I'm sure the money saved in ax efficiencies plays a big part in their decision but also consider that you are your own boss - and the pro's and cons that come with that. It's all about the balance! good luck, whatever you decide

[Paul2412]

I have always been employed PAYE, but now have reached the stage in life where I want more time off work than companies allow. I have been approached by an employment agency who have asked me to take on a contract.

They tell me that I should either set myself up as a limited company or get an "umbrella company" to sort out my financial affairs and it would cost me about £25 per week.

Does anyone have any advice? Would it be better to stay PAYE? Would I be better off using an umbrella company?

 

Before I came to Australia I worked as an IT contractor for about 2 years.

 

£25 sounds like robbery to run an umbrella company. I paid £20 to get a company set up for trading, then opened a free business account with HSBC. When I contracted the agency just paid me the gross salary and it was left to me to sort the tax out.

 

Basically, if you don't pay yourself a wage it makes it much easier.

 

You can award yourself dividend payments each week, which would mean that you can receive up to £38,000 per year at just 20% tax (corporation tax) and also not have to pay National Insurance because you aren't being paid a wage.

 

It was very simple to do, and I just had an accountant sort out my annual return for £50 once a year.

[Cyclone]

If you don't pay yourself a salary then you won't qualify for the contribution dependant state pension (if it still exists when we retire).

 

Sensible contractors pay themselves a salary sufficient to qualify as having made NI contributions.

[FWDiane]

Agree with Cyclone, unless you are covered in other ways you want to keep contributing to NI to ensure you dont miss out, not just pension but sick pay, maternity/paternity etc.

But a quick chat to an accountant used to dealing with contractors will advise the most efficient salary/dividend split to maximise your take home.

[ricgem2002]

Tell your mate to go Ltd though, then there's no need to involve an umbrella.

i think its part of his contract that he has to go through the umbrella to get paid