Consulting / Contracting

waspy88

waspy88

waspy88

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9 Sep 2008
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Location
United Pingdom
Hello Guys.

I have been a PAYE employee all my life. But as of next month I will be switching to a consulting gig and a long term contracting role. However.. the daily rates are going to mess up my tax quite badly. The agency I will be contracting with said they will suggest an Limited Company or an Umbrella Company.. :confused:

Do any of you do this regularly, and should I be aware of any serious pitfalls. I am meeting an accountant next week too, but completely new to this. So any good resources or tips would be much appreciated.

Thanks guys!
 
Ltd company is the way. It's more efficient. You can pay yourself enough to live on for example then leave the rest in the company or divert to a pension.
Umbrella company is the least efficient way but if you need to get at all the money then isn't a bad option. I used one for way too long really but looking back at it, it was good to have the funds in my personal account during the years I used an umbrella co, even if I did pay a load of tax although my rate wasn't so great back then anyway so the impact wasn't as bad as if my rate was higher(where the tax would have been worse).

All the best for your contracting life - it's great. I've never looked back really although did try perm for 1.5 years recently (a contract to perm situation which I took as it was in home town), but now back working under my own co again. For me it's not just about the money but the flexibility it provides too, and also working in different environments, learning new skills on the job, meeting different folks :)
 
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Ltd company contractor here :)

Meeting with your accountant sooner rather than later will set you on the right path. They work wonders with finances (voodoo, in all honesty) and will guide you through the process.
 
Limited company is the way to go, especially if you're operating outside of IR35 (read the guides at ContractorUK). Get a contractor-focussed accountant - I use InTouch - and get the ball rolling. Assuming you're going to be working for a decent rate, you need to get VAT registered as soon as possible as it takes a while to come through - accountant will explain this.

If you use a reputable accountant, the paper work overhead is as low as it can be. I enter my expenses and invoices into an online portal and they take care of the rest. I get an email to tell me how much VAT and PAYE to pay once a quarter, and that's it, apart from the yearly returns and accounts which is generally just a questionairre to fill in.

Starting your own limited company does carry some legal obligations for running a business so do not mess about when it comes to documenting your expenses and keeping your PAYE and VAT up to date and correct. The alternative is to go with an Umbrella although you will get hammered for tax and can't claim things like living expenses and travel if you're working away from home. I would actually recommend this approach for a first shorter-length contract as there's a lot to take onboard when starting your own limited co - I can recommend Contract Umbrella.

Any other questions, let us know. Good luck.
 
BillHicksRIP said:
Limited company is the way to go, especially if you're operating outside of IR35 (read the guides at ContractorUK). Get a contractor-focussed accountant - I use InTouch - and get the ball rolling. Assuming you're going to be working for a decent rate, you need to get VAT registered as soon as possible as it takes a while to come through - accountant will explain this.

If you use a reputable accountant, the paper work overhead is as low as it can be. I enter my expenses and invoices into an online portal and they take care of the rest. I get an email to tell me how much VAT and PAYE to pay once a quarter, and that's it, apart from the yearly returns and accounts which is generally just a questionairre to fill in.

Starting your own limited company does carry some legal obligations for running a business so do not mess about when it comes to documenting your expenses and keeping your PAYE and VAT up to date and correct. The alternative is to go with an Umbrella although you will get hammered for tax and can't claim things like living expenses and travel if you're working away from home. I would actually recommend this approach for a first shorter-length contract as there's a lot to take onboard when starting your own limited co - I can recommend Contract Umbrella.

Any other questions, let us know. Good luck.
Click to expand...

Echoing this, I use Xero to enter expenses etc. The mobile app is a bit of a pain but it gets the job done.
 
waspy88 said:
When you have a limited company do you have to do a fair bit of paper work yourself, like tax returns, NI and other bits and bobs?
Click to expand...

Not really, your accountant does pretty much most of it, you just have to check it before it's submitted as you are ultimately liable for any problems/mistakes. The only real paper work is inputting of expenses.
 
Thanks for the heads up guys.
1 contract is for 8 months, whilst the other is intermittent / indefinite (But more sporadic)
So for this purpose the Ltd company sounds like my best option.

A bit nervous but sounds like its a regular thing people do. Thanks for the heads up :)
 
Ltd Company director, couple of tips in my experience;

- IR35; read, read, read and read some more.
- Use an accountant, preferably one with an online portal, Freeagent is awesome in my experience
- Jump in feet first, if you're contracting you're an independant business and there to do a certain job; if you feel like you're being treated as a permenant employee do something about it sooner rather than later.
 
Company set up.. so what's the deal with bank accounts. Just had a look at Lloyds bank account and its showing they charge for cash in and out! cheeky sods. Is this tax deductible :p

My accountant has put a lot of my fears to bed thankfully. Thanks for the tip guys !
 
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