Have I effed myself ?

[ThinkIeffedMyself]

I really need some perspective from people who know. I work in finance, very niche stuff. I earn good salary. On top of that I used to contract and that was boosting my income nicely without a lot of headache. Now the company in contracted for offered me more hours suggesting I set up my own company. Its a lot of work and I think I fucked myself over agreeing to that as it's my company now that will own the profits and if I pay myself I am taxed at high rate therefore much worse off than being actually employed by them directly. They feel that having a company is actually in my favour but I can't see how. Dividends are high rate. Corporation tax to pay.

How can I get out of it? Or am I missing ways to save money as they suggested?

Help as I can't work all those hours and be paid a pittance. Not worth the hassle.

If it becomes your only or main client, you need to be careful that HMRC don't consider you to be an employee. You need to be aware of IR35 rules https://www.gov.uk/guidance/understanding-off-payroll-working-ir35
If the worker is deemed to be employed for tax purposes, the deemed employer must deduct Income Tax and employee National Insurance contributions from fees paid to the worker’s intermediary.
You may be offered schemes that wrongly claim to get around the off-payroll working rules. Find out how to recognise tax avoidance schemes aimed at contractors and agency workers.

Thank you, that's definitely worth noting.

What I'm raging about is that if I was employed, they would be paying me a lot more because the tax would eat half of it. Having a Ltd company meant to be beneficial but I don't see how it can be if my money is tied up in the business and it's less than an employment ( before tax and NI) would be. Am I missing the benefits here somewhere? Accountancy is not my skill..

You might be better posting on Money Matters.

If you were (still) an employee, the total cost of your services would be your gross salary plus e'ers NHI (plus any benefits in kind) and you would benefit to the tune of your net salary plus the value (to you) of any benefits.

So what has changed? Has the total cost of your services to your employer reduced? It sounds like that is the main driver for this change. And what is your benefit? You can choose your salary, thus reducing your tax rate and NHI, and take out the rest of the profit as dividends which used to be taxed at a lower rate as they had already suffered corporation tax. And corporation tax in small companies was at a lower rate than income tax.

But it's exactly that "saving", which is a cost to HMRC, which gave rise to the IR35 rules.

I think you need an accountant to show you how the permutations can be made to work.

You would benefit from speaking to an accountant. There are pluses and minuses to being self-employed. E.g. you can put work-related expenses through your company. But it depends on a lot of different factors, there’s no one size fits all.

It's more complicated. They didn't offer me the salary I wanted so I went elsewhere, where I shall remain. Ex boss realised his mess so we settled with contracting. They want me to do more work and offered more money however I realise now it's cheaper for them not me. If they were to employ me at this level, it would cost then around 90k. Paying a company bill is significantly less... therefore they benefit and I'm stuffed as this level of work warrants higher earning if I can't pay myself from my company because I will incur high tax charge. Paying Corp tax then dividend doesn't work either as I will be under higher rate. There is only so many costs I can deduct so ultimately I feel like I have fallen for the supposed benefits

There are 253 working days in 2025, minus (say) 27 days holiday = 225 days. 90k/225 days is £400 per day which is a very reasonable day rate for a professional. Somewhat on the low side actually, bearing in mind that they only pay when you work, and have no cost of termination when they no longer need you, so in principle you should earn a premium on top of that, not less than £500. I've seen day rates higher than that over 20 years ago...

If you have another job and it's incremental/not full time (as employee or through the company?) there's a better chance that you won't get caught by IR35 rules.

But...you have a complex situation, definitely worth advice from a qualified accountant. A small local firm should be able to do that, it doesn't need a Big 4 firm.

Thank you. That's what I'm saying if I was employed, I wouldn't take below 90k for that job. They are paying paying significantly less as it's meant to be beneficial but sadly I don't see how

For someone who works in finance you do not seem very switched on as to how this finance stuff works. Use an Umbrella company if you do not want to be self employed. If the client is paying you less than the full cost of employing you then ... you are being paid less. Why was that not very obvious?

Oh OP, go and see an accountant. There are far too many "it depends" for anyone to help you on here. You could easily be better off through a company. Whether you'd fall foul of employment status rules (including IR35) is one thing. How you manage drawings from the business and the effective rate of tax is another. Any many many other considerations alongside.
One thing is almost certain, which is that your engager wants to do it to save the new rate of NI. This sort of thing is going (in my view) to be the enduring legacy of Reeves' policies.

I do niche finance stuff on big scale not accounts. Totally different thing and why people employ accountants and separate payroll companies. Not my area of expertise

Speak to an accountant asap. Also bear in mind that if you do set up a company, you may end up reaching the turnover threshold for VAT and that is a whole can of worms you don't want to have to open.

By having you contracting to them either as yourself or via a company invoicing them for your time, they don't have to pay employer's NI, they don't have to enroll you on their pension scheme, and you will not be entitled to any holiday or sick pay, or any other employee benefits. All in their favour, basically.

Yes please get professional advice which will also extend to the best way of setting up a company for your circumstances. Bear in mind that if you become a Ltd company, you can be employed by that company, take a salary which then reduces your profits (and exposure to Corporation Tax). A decent accountant will tell you the best way of playing with the sums.

But yes, the company contracting you is saving 15% Employers’ NI and 3% (min) pension contribution.