6 months work - salary or day rate?

[petemurphy]

Hi,

friend is looking at some work that is 6 months contract ( could possibly be more ).

They havent decided yet if they want to do it as a fixed salary or a day rate.

Which do you think is best - salary or day rate?

he's never done contracting ( nor me ) as such so is the tax any different re day rate or salary?

Thanks

[red_slr]

Via his own LTD? U Co? PAYE?

That's what will make the difference.. not when it is paid but to whom.

[petemurphy]

red_slr said:

Via his own LTD? U Co? PAYE?

That's what will make the difference.. not when it is paid but to whom.

thats the question really which is the best way - he's just left full time normal paye salaried job

[essayer]

Day rate equivalent to whatever’s the norm in that industry.

Or, a fixed sum for the work, at his/her own risk.

Wouldn’t entertain a salary unless it was broadly equivalent after tax and benefits to a day rate. (It won’t be)

[rsbmw]

If they are considering salaried, it would very likely be inside IR35 at which point he's probably just as well going salaried for no hassle, holidays, pension etc.

[red_slr]

How long have you got? Also a lot of it will depend on his personal circs.

For 6 months, PAYE might not be beneficial BUT you would get 14 days paid leave. Plus SSP if needed. Plus Work Place Pension. Plus any extra benefits that the Company might offer. (eyes / dental etc?)

IF going as a contractor then LTD is probably best but would need to get the ball rolling on that one fast if he does not have his own LTD yet. The setting up of the Company is fairly quick but he will need a bank account, VAT reg (possibly), Gov Gateway, Insurance, Work Place Pension (or opt out) and the usual guff like invoice / letter heads etc.

Also ensure he is fully aware of what IR35 is, and what it might mean if he does not comply. Also ensure he knows how to pay NI, when to pay it etc. Remember to factor in the cost of an accountant doing his CT600 etc at the end of the business FY.

Personally, for all the hassle of LTD these days for such a short period I would just go cards in and ask for the maximum salary you think you can get away with.

[RizzoTheRat]

If he plans to do a lot more work like this then setting up a Ltd company can be worth it. Only costs a few hundred quid to set up a company, but you then have an overhead of accountancy costs and the like, plus likely to need his own liability insurance. Another way of operating is via an umbrella company, he'd charge the customer by the hour or by the task, the umbrella does all the tax stuff and pays him PAYE. Or just do the job PAYE as a short term hire of the company.
If they're looking at an option of doing it PAYE it probably means the job would be inside IR35 so worth digging in to that as the main implication is he'd have to pay more tax than if he's outside IR35.

A couple of decent resources to look at
https://www.ipse.co.uk/
https://www.contractorcalculator.co.uk/

[petemurphy]

wow sounds a minefield! thanks will send the info on all good