Sole Trader or Ltd Co. or something else
Discussion
Finally, after being out of work since October, I get 2 jobs 
The first is as a consultant for 8 weeks, paying a set fee, after which there will no more consulting/self emplyed work.
The second starts immediately after this finishes, and is a permanent position with another company, paying the usual employee tax and NI thing.
Obviously I shall have to see an accountant to do what's necessary, but I'm asking you folks first as "I know when I'm a seasoned PistonHeader..."
Any thoughts on the best way to pay as little tax as possible on the consultancy income. Legal of course.
Your wisdom will be much appreciated, and will probably extend to DVDs of the Surrey Runs.
Thanks in advance,
Steve
(and apologies to those folks who may have been after my Tuscan....its no longer on the list of things to be sacrificed)
>>> Edited by luca brazzi on Tuesday 8th April 14:25
The first is as a consultant for 8 weeks, paying a set fee, after which there will no more consulting/self emplyed work.
The second starts immediately after this finishes, and is a permanent position with another company, paying the usual employee tax and NI thing.
Obviously I shall have to see an accountant to do what's necessary, but I'm asking you folks first as "I know when I'm a seasoned PistonHeader..."
Any thoughts on the best way to pay as little tax as possible on the consultancy income. Legal of course.
Your wisdom will be much appreciated, and will probably extend to DVDs of the Surrey Runs.
Thanks in advance,
Steve
(and apologies to those folks who may have been after my Tuscan....its no longer on the list of things to be sacrificed)
>>> Edited by luca brazzi on Tuesday 8th April 14:25
top news!
Finally, after being out of work since October, I get 2 jobs
The first is as a consultant for 8 weeks, paying a set fee, after which there will no more consulting/self emplyed work.
The second starts immediately after this finishes, and is a permanent position with another company, paying the usual employee tax and NI thing.
Obviously I shall have to see an accountant to do what's necessary, but I'm asking you folks first as "I know when I'm a seasoned PistonHeader..."
Any thoughts on the best way to pay as little tax as possible on the consultancy income. Legal of course.
Your wisdom will be much appreciated, and will probably extend to DVDs of the Surrey Runs.
Thanks in advance,
Steve
(and apologies to those folks who may have been after my Tuscan....its no longer on the list of things to be sacrificed)
>>> Edited by luca brazzi on Tuesday 8th April 14:25
I would suggest that Ltd company would not be a good idea given only 8 weeks work - there are many umbrella companies around that you could use.
AFAIK, the govt. has tried to close up tax loopholes for contractors.
Might be simplest to take a short term contract & then the employer has to deal with PAYE and NI (and provide holidays/sick pay) as if you were a permie.
If you do it through your own company, I believe you will have to charge enough to cover your tax & NI (employer's contribution as well as employee's) and deal with it all yourself, which seems a bit of overkill for 8 weeks' work.
Is cash in hand an option?
>> Edited by pdv6 on Tuesday 8th April 14:32
Might be simplest to take a short term contract & then the employer has to deal with PAYE and NI (and provide holidays/sick pay) as if you were a permie.
If you do it through your own company, I believe you will have to charge enough to cover your tax & NI (employer's contribution as well as employee's) and deal with it all yourself, which seems a bit of overkill for 8 weeks' work.
Is cash in hand an option?
>> Edited by pdv6 on Tuesday 8th April 14:32
dontlift said:
Finally, after being out of work since October, I get 2 jobs
The first is as a consultant for 8 weeks, paying a set fee, after which there will no more consulting/self emplyed work.
The second starts immediately after this finishes, and is a permanent position with another company, paying the usual employee tax and NI thing.
Obviously I shall have to see an accountant to do what's necessary, but I'm asking you folks first as "I know when I'm a seasoned PistonHeader..."
Any thoughts on the best way to pay as little tax as possible on the consultancy income. Legal of course.
Your wisdom will be much appreciated, and will probably extend to DVDs of the Surrey Runs.
Thanks in advance,
Steve
(and apologies to those folks who may have been after my Tuscan....its no longer on the list of things to be sacrificed)
>>> Edited by luca brazzi on Tuesday 8th April 14:25
I would suggest that Ltd company would not be a good idea given only 8 weeks work - there are many umbrella companies around that you could use.
I would suggest an umbrella company also! There are some good ones out there, and you will be surprised at how much tax you have to pay! Just put in a ton of legitimate expenses. Works for me!!
I concur, the tax breaks, for example, for the first few thousand miles os running you own car for bussiness purposes is IIRC 63p a mile. All a legit expense so that's another £2.5k in your bin sans tax
You might wish to consider sole trader but your potential "loss" isn't limited like it is with a company just in case anything goes completely tits up (again IIRC)
I can reccomend a decent accountant who has saved me a small fortune, but may not be worth his fee for only 8 weeks income
Sorry don't know anything about umbrella companies (mine was my own limited company) but this may well be the way to go if you're definately not doind any more free lance work in the financial year (also you'll need a decent turnover to be VAT registered (£48k IIRC))
You might wish to consider sole trader but your potential "loss" isn't limited like it is with a company just in case anything goes completely tits up (again IIRC)
I can reccomend a decent accountant who has saved me a small fortune, but may not be worth his fee for only 8 weeks income
Sorry don't know anything about umbrella companies (mine was my own limited company) but this may well be the way to go if you're definately not doind any more free lance work in the financial year (also you'll need a decent turnover to be VAT registered (£48k IIRC))
Just do the 8 weeks as an independent consultant - no company, nothing.
When it comes to tax return time, just declare it as secondary income, but less legitimate expenses, which covers a share of your home phone bill, heating, electricity, travel, etc. since you will of course be doing some work from home.
Won't save the most tax, but will save lots of paperwork and grief in trying to avoid more...
When it comes to tax return time, just declare it as secondary income, but less legitimate expenses, which covers a share of your home phone bill, heating, electricity, travel, etc. since you will of course be doing some work from home.
Won't save the most tax, but will save lots of paperwork and grief in trying to avoid more...
If you have the time to set one up use an umbrella co. My father used to be a computer contractor and he always went this way. Also, my mother runs a computer recruitment agency and IIRC, almost all the contractors which go through it use umbrella companies.
Are you insured through the company you will be consulting for? If not then at least personal assets won't be at risk through a Ltd/umbrella co. if something were to go wrong, unlike if you are a sole trader.
Are you insured through the company you will be consulting for? If not then at least personal assets won't be at risk through a Ltd/umbrella co. if something were to go wrong, unlike if you are a sole trader.
You will almost certainly find that the company to which you want to provide consultancy services to will be very unwilling to pay you directly unless at the very minimum you provide them with a letter stating that they are not liable for any tax and that you are responsible for declaring and paying all taxes etc.
You don't need to do anything to be a Sole Trader, you just declare the additional income as such when you do your tax returns. You will need to do a Self Assessment tax return at year end though. You are unlikely to need to pay Employers NI as you are not an employer. Likewise you do not need to be VAT registered so you do not (and indeed cannot) put VAT onto your fees. You can also not claim the VAT back on any expenses you incur.
If you are a Sole Trader and you are sued by your client then you have unlimited liability - they will take your house and everything you own including the shirt off your back. With a Limited Company you have limited liability (hence the name 'Limited Company'!) but it is far too much hassle for 8 weeks work. An Umberella Company would be a good compromise although I would seek the advice of an accountant on this.
You don't need to do anything to be a Sole Trader, you just declare the additional income as such when you do your tax returns. You will need to do a Self Assessment tax return at year end though. You are unlikely to need to pay Employers NI as you are not an employer. Likewise you do not need to be VAT registered so you do not (and indeed cannot) put VAT onto your fees. You can also not claim the VAT back on any expenses you incur.
If you are a Sole Trader and you are sued by your client then you have unlimited liability - they will take your house and everything you own including the shirt off your back. With a Limited Company you have limited liability (hence the name 'Limited Company'!) but it is far too much hassle for 8 weeks work. An Umberella Company would be a good compromise although I would seek the advice of an accountant on this.
thanks for your offerings so far....
Just dawning on me how complicated it can be. Don't feel so bad about charging a fortune now
Will have to look at getting some free accountancy advice re:
a) independant consultant
b) umbrella company
c) sole trader
PS how would tax man find out if I just paid the cheques into my account and declared nothing? Would never do this of course......
Steve
Just dawning on me how complicated it can be. Don't feel so bad about charging a fortune now
Will have to look at getting some free accountancy advice re:
a) independant consultant
b) umbrella company
c) sole trader
PS how would tax man find out if I just paid the cheques into my account and declared nothing? Would never do this of course......
Steve
luca brazzi said: PS how would tax man find out if I just paid the cheques into my account and declared nothing? Would never do this of course......
A lot of people do this and get away with it, but if the company you are working for is looked into or you personally are examined by the tax men then they will be able to spot this a mile off. You just have to weigh up the risk - lots more money v. possible jail time and big fines. Its just another gamble (you could always claim that you 'forgot' to declare them or didn't understand the system, but I doubt this would wash)
luca brazzi said: thanks for your offerings so far....
Just dawning on me how complicated it can be. Don't feel so bad about charging a fortune now
Will have to look at getting some free accountancy advice re:
a) independant consultant
b) umbrella company
c) sole trader
PS how would tax man find out if I just paid the cheques into my account and declared nothing? Would never do this of course......
Steve
I know people who have done similar things and have never been caught! But to be honest with you it only takes one phone call and a couple of signatures and you can be working through an umbrella company. There are some that can set-up an account for you online too. Honestly you will be surprised at how little tax you end up paying!!
I may be wrong about this, but I'm sure someone told me (albeit a few years ago!) that it is very difficult to work in IT/Consultancy as a sole trader, as the company engaging you services don't like doing it. No idea why, but I'm sure there must be something on one of the contracting web pages about it.
Sparks
Sparks
pdv6 said:
The GMan said: There are some that can set-up an account for you online too.
Got any good links?
Here is one.
www.360-group.com
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