Contracting - Worth setting up as a Ltd company?
Discussion
Hi all and Happy New Year!
I recently started as a contractor for a large company in the Project Management field.
Currently I'm working as PAYE through the agency who I was recruited through.
Is it still worth setting up as a Ltd company?
I know new rules have been in place since last April (?) making it less tax efficient to set up a Ltd company. Is this the case or is it still worth doing?
Any help / advice much appreciated. Thanks.
P.s. I've already posted this in the Jobs and Employment section, but thought Finance might be more relevant.
I recently started as a contractor for a large company in the Project Management field.
Currently I'm working as PAYE through the agency who I was recruited through.
Is it still worth setting up as a Ltd company?
I know new rules have been in place since last April (?) making it less tax efficient to set up a Ltd company. Is this the case or is it still worth doing?
Any help / advice much appreciated. Thanks.
P.s. I've already posted this in the Jobs and Employment section, but thought Finance might be more relevant.
Limited companies will not confer the tax advantage they did before 5 April 2016 - but they still do confer tax advantages.
However, you still do need to be aware of IR35 and all that entails and you should do your best to ensure the arrangement you or your company has with the entities it works for does not put you at risk.
However, you still do need to be aware of IR35 and all that entails and you should do your best to ensure the arrangement you or your company has with the entities it works for does not put you at risk.
Have a look at the FAQ section on this site. If you contracting for the longer term then set up a limited company to contract through.
http://www.sjdaccountancy.com/mobile
http://www.sjdaccountancy.com/mobile
The worst possible way to be a contractor is PAYE via the agency.... so yes, being a LTD would be almost certainly worth it for you.
I would advise you also look at VAT registration.
You need to speak to an accountant who is familiar with contractors because everyone has a slightly different position.
I would advise you also look at VAT registration.
You need to speak to an accountant who is familiar with contractors because everyone has a slightly different position.
anonymous said:
[redacted]
Does the £5,000 dividend allowance form part of your total tax band?I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Greshamst said:
Does the £5,000 dividend allowance form part of your total tax band?
I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Yes.I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Eric Mc said:
Greshamst said:
Does the £5,000 dividend allowance form part of your total tax band?
I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Yes.I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
£5000 div 0 tax
Remainder of pa £2940 0 tax
£27000 @ 7.5%.........etc
red_slr said:
The worst possible way to be a contractor is PAYE via the agency.... so yes, being a LTD would be almost certainly worth it for you.
I would advise you also look at VAT registration.
You need to speak to an accountant who is familiar with contractors because everyone has a slightly different position.
The flatrate VAT advantage is evaporating so it's less of a given it will be worthwhile after April, but yes, good accountant is incredibly valuable.I would advise you also look at VAT registration.
You need to speak to an accountant who is familiar with contractors because everyone has a slightly different position.
OP, what agency placed you if you don't mind me asking? Looking for a new PM job and a return to contracting is quite appealing.
thebraketester said:
Am i right in thinking that the holiday pay/allowance situation changes if you go LTD company? Might be miles off the mark there....
When you work through your own limited company you don't get holiday pay. You are only paid for the days you work. This is usually off set increase in earning.Eric Mc said:
Limited companies will not confer the tax advantage they did before 5 April 2016 - but they still do confer tax advantages.
However, you still do need to be aware of IR35 and all that entails and you should do your best to ensure the arrangement you or your company has with the entities it works for does not put you at risk.
Indeed you do. Especially if working in Public Sector post April 17. I'm sure that will roll out to Private Sector sharpish as well. The playing field has changed dramatically, more hoops to jump through from April to stay "outside"However, you still do need to be aware of IR35 and all that entails and you should do your best to ensure the arrangement you or your company has with the entities it works for does not put you at risk.
Don't delay in getting advice - regardless of which way you go. I waited 3 months because I was setting up in my new role, finding my feet, travelling a lot etc etc and that delay was a big mistake. I thought I knew better and I thought it was simple - I was wrong on both counts.
If possible find an accountant who understands contractors and also someone you can trust with your full financial situation as it really will help in the long run.
Also make sure you get someone who is very prompt, the cheapest are cheap for a reason. Expect to pay a reasonable sum for good advice.
If possible find an accountant who understands contractors and also someone you can trust with your full financial situation as it really will help in the long run.
Also make sure you get someone who is very prompt, the cheapest are cheap for a reason. Expect to pay a reasonable sum for good advice.
Eric Mc said:
Greshamst said:
Does the £5,000 dividend allowance form part of your total tax band?
I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Yes.I.e someone with a full £11,000 personal allowance should be able to earn £43,000 without being charged a higher tax rate, does this include the £5,000 tax free dividend?
So
£11,000 salary =0 tax
£5,000 div = 0 tax
£27,000 div @ 7.5% = £2,025 tax
Is that right?
Dividends can only be paid out of available after Corporation Tax profits.
If the company has been trading a number of years, even if the current year's profit are not high enough to justify a desired dividend, there may be undistributed reserves available from earlier years - what are sometimes called "Accumulated Profits"..
If the company has been trading a number of years, even if the current year's profit are not high enough to justify a desired dividend, there may be undistributed reserves available from earlier years - what are sometimes called "Accumulated Profits"..
MitchT said:
What about the salary part?
Do you deduct 20% corporation tax and then do the numbers for the salary and the dividends, or do you deduct the salary from your profit before deducting the corporation tax and then do the numbers for the dividends?
Salary, allowable expenses and costs all get taken out, the remainder is the profit and that's corporation taxed at 20%. Do you deduct 20% corporation tax and then do the numbers for the salary and the dividends, or do you deduct the salary from your profit before deducting the corporation tax and then do the numbers for the dividends?
Yes - salary is a proper business cost, so it is included with all the other business costs when arriving at the net profit on which the Corporation Tax will be calculated.
Dividends are NOT a business cost. They are a distribution to the shareholders of available business profits after ALL costs have been deducted, including the Corporation Tax charge.
Dividends are NOT a business cost. They are a distribution to the shareholders of available business profits after ALL costs have been deducted, including the Corporation Tax charge.
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