Contractor query - Ltd or Umbrella

[LtdVUmbrella]

Evening all. Wasn’t sure whether to post in Work or Money.

I’m due to commence a role that pays £990 per week (30 hours). The Agency have today told me that I can’t be PAYE via them, I need to either use an Umbrella or a LTD company.

Contract is within IR35.

Compliant Umbrella costs £15 per week plus £89 ‘employment costs’ which i think is employer NI contributions. Holiday fund accrual of £95.

Taxable pay is then £790, Employees NI is £44, Tax is £110 leaving a Net Pay of £637. Or I can take holiday pay upfront and come out with £697.

Would or make more sense to open a LTD company? Assignment rate won’t change though. I haven’t contracted in years but when I did the LTD company rate used to be higher.

Hi

I thought the same recently

I guess it might depend upon how long you will contract for.

The gov.uk actually had a decent guide to it. You will need insurance and a bank account. As you say you can save money on the national insurance (both) and from claiming expenses.

I am not contracting much longer so decided against it

Umbrella is less effort for you, and (assuming they do it right) less risk of you forgetting something, or spending all your money and being unable to pay your tax and NI.

It may be easier for you get a loan or mortgage if you have a stack of payslips and you are an Employee.

Oh, and ask if the umbrella will make Employer Conttibutions to your personal pension. No NI or tax is due on them, your taxable pay will be reduced by the amount diverted to the pension. The money does not pass through your hands. You can decide if, and how much, the contributions are.

Def umbrella

I used paystream in the past and they were fab

Thanks for responses.

I need to look at salary sacrifice personal pensions - no idea where to start as was previously a member of the council scheme.

I found it very easy when I used that method. You need to have, or set up, a personal pension, and ask them for the mechanism, account number, references for Employer Contributions to be made.

You will tell the pension company how you want the contributions to be allocated.

You could get an IFA to handle it if you don't mind their fees and find it difficult to fill in forms.

And I'd expect the Umbrella's payroll operation to use a package that can make the deductions from your earnings and transmit them to the pension company.

Ask them before you make your choice of Umbrella.

In my case I used to have a monthly amount. I suppose you could ask for a percentage of the gross.