Contractor expenses

Indy500 · 3 Apr 2008 at 15:53

Morba said:
sr4470 - you dont setup umbrella companies any more, you can join a bigger company that trades as, but they arent as good as they used to be.

I'm not sure if the latter is what they meant, I'll find out the details soon enough.

Morba · 3 Apr 2008 at 15:54

Essentially an umbrella company will pay you as if you are a member of their staff, but that means PAYE at a normal wage.

Your own company - pay yourself minimum wage and then pay yourself dividends from the rest, much more tax efficient meaning you earn more money

Indy500 · 3 Apr 2008 at 15:57

Morba said:
Your own company - pay yourself minimum wage and then pay yourself dividends from the rest, much more tax efficient meaning you earn more money

This makes much more sense. But aren't dividends taxed at a higher rate? :confused:

Stolly · 3 Apr 2008 at 22:34

Morba said:
I thought one of the IR35 'tests' was period of time of contract, so its not a case of being somewhere for 2 years, it can be the time of indication that you will be, eg you have been there 18 months and are given a 12 month extension, you know at 18 months that you would be there 2 years or more, placing you 'inside' IR35.

sr4470 - you dont setup umbrella companies any more, you can join a bigger company that trades as, but they arent as good as they used to be.
Better is to start your own company, you will make more money this way.

The opinion on the Pro Contractors Group forums is that length of contract has nothing to do with IR35. There was one example of someone being on contract with the same place for 20 years, and he's out of IR35.

@if ®afiq · 5 Apr 2008 at 17:06

Which bank(s) would you reccommend for a business acount?

ramirez · 5 Apr 2008 at 18:05

another thumbs up for SJD accountants

very good advice from them.

Morba · 5 Apr 2008 at 21:53

SJD will no doubt recommend Cater Allen :]
I use them.

Stolly · 5 Apr 2008 at 22:04

Yeah Cater Allen seem OK.

No interest on the account up to having 5k in though, and not much at all until you have 100k in or so.

Depending what highstreet bank you are in you may get free business banking and interest as well.

Morba · 5 Apr 2008 at 22:17

BUt as a contractor you want as little in that account as possible anyway, the more there is that isnt accounted for in one way or another = more corp tax

Stolly · 5 Apr 2008 at 23:08

Well, thats sort of true, you want ways to get it from the business into you personal account that are costs for the company but not taxable income for you. Tax free money tastes sooo sweet !