Going Outside IR35 - use an umbrella or do the tax myself?

R.O.S.S.I

R.O.S.S.I

R.O.S.S.I

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I've managed to secure a contract role which will be paid to me outside of IR35. I've just come from a full time, perm role where my tax and NI was paid PAYE so this is all a bit of an unknown to me and has sprung up quite quickly.

I understand I can opt to do a lot of the tax side of things myself and declare it myself with HMRC at the end of the year, however are there any drawbacks to just using an umbrella company to save me the hassle? It's only a 6 month contract (with a view to poss going perm) but just wondering if an umbrella company might save me a lot of admin if its going to be a one-off thing as I imagine I will be going back to normal PAYE after it?
 
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I'd only use an umbrella for inside IR35, and that's coming from someone who's never worked an outside IR35 contract (I setup my own LTD but then ended up taking an inside IR35 contract).

As an aside if you are already talking about "poss going perm" before you've even started then I'd be a bit wary of contract terms, if you do 6 months outside IR35 and then switch to perm doing the same thing (not sure if that's the case), it raises potential questions about whether you were truly outside IR35 in the first place.
 
100% don't go with an Umbrella if you're outside of IR35, like HangTime I was working government contracts when I did it so I was inside, but you lose a lot of the benefits and money if you use an Umbrella for outside.

Inside IR35 Contractor Calculator | PayStream

Have you fallen inside IR35 and looking at your umbrella company options and what your take home pay would look like? Use our inside IR35 contractor calculator.
www.paystream.co.uk www.paystream.co.uk

This gives you a sample breakdown of Ltd vs Umbrella potential earnings.
 
I've spoken to a few places and some online accountancy places who have all pretty much advised in these circumstances I would be best going down the Ltd company route and managing it that way, which is fine but just needs a bit more admin to be worked through.

I applied to setup the Ltd company today and will be applying for the bank account at some point later this week.

It is my understanding that the most tax efficient way to do it is to set up a Ltd company and pay myself around £240 a week as a Director, then take whatever further chunk out as a dividend and pay the tax on that through my self assessment. Does this sound right?

I've found a few places online that will do all of the accountancy side of things for me for a monthly fee (that aren't umbrella companies), but I'm not sure if their monthly fee is quite steep (£80-£150 + VAT per month) - does that sound about right?
My only benchmark was I used an accountant to file my self assessments about 3-4 years ago when I was declaring rental income when I was abroad and he charged a one off £125 every year.

The companies I've found all say they will manage all of general accountancy related stuff and provide various addons like:
  • having a dedicated accountant to speak to
  • year end accounts
  • corporation tax return
  • director's self assessments
  • formation of company (*if not formed)*
  • director's payroll
  • tax efficiency recommendations
  • unlimited support via phone or email
  • online accounting software
  • app for invoicing and receipts
Does anyone know of any companies that do the above kind of thing they might be able to recommend?
 
Throrik said:
100% don't go with an Umbrella if you're outside of IR35, like HangTime I was working government contracts when I did it so I was inside, but you lose a lot of the benefits and money if you use an Umbrella for outside.

Inside IR35 Contractor Calculator | PayStream

Have you fallen inside IR35 and looking at your umbrella company options and what your take home pay would look like? Use our inside IR35 contractor calculator.
www.paystream.co.uk www.paystream.co.uk

This gives you a sample breakdown of Ltd vs Umbrella potential earnings.
Click to expand...
These were one of the people i have already spoken too but their fee is £150 per month + VAT. So currently just seeing what else is out there as I know there will be others available for less.
 
R.O.S.S.I said:
These were one of the people i have already spoken too but their fee is £150 per month + VAT. So currently just seeing what else is out there as I know there will be others available for less.
Click to expand...

For what it's worth, i'm not suggesting using paystream, I was merely suggesting to view their online calculator to show the with umbrella vs ltd differences.
 
I’m £90 a month including VAT for full accountancy services.

A good accountant will set up your company, deal with your PAYE and keep you right with dividends, personal taxes and corporation tax.

Would be useful to also set up a workplace pension as well.
 
Jokester said:
I’m £90 a month including VAT for full accountancy services.

A good accountant will set up your company, deal with your PAYE and keep you right with dividends, personal taxes and corporation tax.

Would be useful to also set up a workplace pension as well.
Click to expand...
Yeh I've seen a few come in for around that so if it's the going rate I may just go with them.
 
Jokester said:
I’m £90 a month including VAT for full accountancy services.

A good accountant will set up your company, deal with your PAYE and keep you right with dividends, personal taxes and corporation tax.

Would be useful to also set up a workplace pension as well.
Click to expand...

Maccy said:
Also consider if you need business and liability insurance for your contract - I get that included with my accountant package.
Click to expand...

Would either of you mind sharing who you are with for your accounting services?
 
I'm around £150 a month for Ltd company tax returns, my personal tax return, wife tax return (as she's a 20% shareholder and has a full time PAYE job as well). All the relevant PAYE/dividends stuff etc - taken care of by them.

It's all written off against profits as a cost for the company anyway - but I literally just code the transactions on Xero and they do the rest from their end. Mine is a mid size local firm with a few offices around the local area.
 
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