Newbie Help - Contract work as well as permanent job

[GB2408]

Hi All,

I have read and searched for similar questions but have not been able to find anything.

I work in a permanent role but I have been offered a contract working OOH (part time).

What's the best way for me to do this in terms of tax? As it is a short term (3 months) contract will I be best going through an umbrella company, and where will I stand (in terms of tax rate) if I do this whilst maintaining my current permanent role (doing both).

My permanent role returns roughly £35K - £38K p.a and the contract will be in the region of £1K per week.

Any help is much appreciated.

Thanks!

[northernladuk]

Hi All,

I have read and searched for similar questions but have not been able to find anything.

I work in a permanent role but I have been offered a contract working OOH (part time).

What's the best way for me to do this in terms of tax? As it is a short term (3 months) contract will I be best going through an umbrella company, and where will I stand (in terms of tax rate) if I do this whilst maintaining my current permanent role (doing both).

My permanent role returns roughly £35K - £38K p.a and the contract will be in the region of £1K per week.

Any help is much appreciated.

Thanks!

You got a part time contract that you can fit in around a full time job for 1K a week? F... me! Way to go fella. I would have said umbrella for sure for the short term of it and costs to set up LTD and shut it down etc but at 1K a week you will be missing out on some nice money. Need to do the sums on that one and I can't help at that level of detail sorry.

Edit : saying that the hassle of setting a LTD up isn't going to fit in well with your time if you are doing a part time and full time job I guess. By time you got your head around it all your done.

[GB2408]

You got a part time contract that you can fit in around a full time job for 1K a week? F... me! Way to go fella. I would have said umbrella for sure for the short term of it and costs to set up LTD and shut it down etc but at 1K a week you will be missing out on some nice money. Need to do the sums on that one and I can't help at that level of detail sorry.

Edit : saying that the hassle of setting a LTD up isn't going to fit in well with your time if you are doing a part time and full time job I guess. By time you got your head around it all your done.

Hi,

Yeah it is working 2 evenings and 1 weekend day a week. Can't say too much in case anyone on here is doing it as well

My mate who is also doing the contract is a full time contractor with his own LTD - Would it be easier to go through his company?

[Stag Cozier]

Hi,

Yeah it is working 2 evenings and 1 weekend day a week. Can't say too much in case anyone on here is doing it as well

My mate who is also doing the contract is a full time contractor with his own LTD - Would it be easier to go through his company?

You'll complicate matters by going through your buddy's company as he will need adequate insurance cover in case he gets sued for your work (not saying it would be defective but you have to think of this scenario). He'll also be your employer and will have to add you to his payroll. Would he be willing to do that?

Anyway, it would be no different in terms of pay and would probably be cleaner if you considered this option to go brolly.

My 2p's worth would be to set up a limited company and take the lot out as dividends as and when you need it. You can either have a couple of grand as salary or no salary (up to you) at all. It's more tax efficient as you'll only be paying 25% tax on dividends as oppose to 40% plus NIC via your mates company or brolly.

The hassle and cost of running a ltd company alongside your permanent work isn't a great.

[Wanderer]

As it is a short term (3 months) contract will I be best going through an umbrella company, and where will I stand (in terms of tax rate) if I do this whilst maintaining my current permanent role (doing both).

My permanent role returns roughly £35K - £38K p.a and the contract will be in the region of £1K per week.

Umbrella is the easiest but that's going to put you smack into higher rate tax bracket at 40% tax, plus employer's NI, plus employee's NI. You are going to pay about 60% tax on this income through an umbrella.

You may be best, tax wise, to form a LTD though it's a lot of admin and accountants will cost you ~1,000 for the year.

Check that your current employment contract doesn't prevent you from having a second job too.

Good luck!

[Fred Bloggs]

IMO, the OP needs to form a Ltd Co and just not draw any income from it at all. He can use this money to build a war chest at which point the OP should be comfortable enough to go full time contracting. Drawing income whilst in full time permie employment is just plain daft in these circumstances in my opinion. The other alternative to this scenario would be to pay all the contract income into a SIPP, but if the OP is a young'un this may not be so attractive as my 1st suggestion. HTH.

[Lion]

I am in a similar situation. I have a short term contract offer although I am already working as permanent. The contract is full time. Could I just take a unpaid leave for 3 month and be back after that without notifying my current permanent employer?

I intend to use umbrella company.

[GB2408]

Thanks for the replies.

I contacted SJD accountancy for some advise and they suggested I register as a sole trader? This way the money gets paid direct to my bank account and they just send me a tax bill at the end of the year. They said for a short term contract like this where I won't be doing another contract after, the setup costs and paperwork involved in setting up my own LTD isn't worth it.

Not sure if this is the best way to do it...

Does anyone go through an Umbrella?

[Wanderer]

sole trader?

That's probably not a bad move if the client will let you do it (Agencies generally won't). Don't forget to put money aside or you will get a frightening tax bill.

[SallyPlanIT]

You'll complicate matters by going through your buddy's company as he will need adequate insurance cover in case he gets sued for your work (not saying it would be defective but you have to think of this scenario). He'll also be your employer and will have to add you to his payroll. Would he be willing to do that?

Anyway, it would be no different in terms of pay and would probably be cleaner if you considered this option to go brolly.

My 2p's worth would be to set up a limited company and take the lot out as dividends as and when you need it. You can either have a couple of grand as salary or no salary (up to you) at all. It's more tax efficient as you'll only be paying 25% tax on dividends as oppose to 40% plus NIC via your mates company or brolly.

The hassle and cost of running a ltd company alongside your permanent work isn't a great.

You pay 32.5% higher tax rate on dividends when you go over £43,875 . 10% is a tax credit when the dividend is raised, the other 22.5% is due the January after the 5th April tax year end. There is no national insurance to pay.

Does your employment with your permanent work allow you to work elsewhere? best check the small print.
A limited company is definitely the best route if you are outside IR35.