Back contracting after 2 years perm

[Stevie Wonder Boy]

The idea of running your own LTD OP is that you pay yourself minimum wage (this will actually be nothing in this tax year as you will certainly be above the tax free £11k?? threshold) and then pay yourself in dividends, which attracts a lower tax amount. (7.5% after the first £5k which is tax free, up to just over 30k after which it rises)

Travel expenses are allowable providing your "home office" is your regular place of work and your client requires you to be on site. After 24 months this changes (search 24 month rule)

As NLYUK said - get an accountant. I use SJD and opted for premium - they set absolutely everything up for me, give me their registered office address with free postal forwarding, 5 million PI insurance via Hiscox, etc. They're expensive but worth it IMO.

Good luck and welcome back to the market.

Just a minor correction - Dividends are paid out of profits, so you will be liable for Corporation tax at 19%. In April the tax free dividend allowance goes down to 2K I believe.

So your nominal tax rate is 19 + 7.5, 26.5% - Once you move into the higher tax band it goes up to 19 + 32.5 = 51.5%. Above 100K the personal tax allowance is reduced, above 150K you are on a straight 19+38.1 = 57.1% rate.

Salaries, Empoyer NI and Employee NI are classed as an expense, so don't attract corporation tax.


So what will get you is the corporation tax bill 9 months after your company year end. So last year with 20% corporation tax, if you took 1,000 as a payment from the company, the actual dividend was 1,250 i.e. £250 or 25% of what you paid yourself. You have been warned. This will be in addition to the dividend tax on your personal taxes in due in January.

[TraceRacing]

Thanks to SueEllen who pointed me in the right direction regarding the IR35 determination (which was the original question). I've requested a copy of the determination from the client via the agency as I'd be short about £110/day on the rate if it was inside IR35.

For those who didn't read the rest of my posting I'm back with InTouch as my accountants who've been busy setting up all the required paperwork and I'll use their guidance regarding salaries / dividends etc as I did previously. I was just looking at what changes have occurred in the past 2 odd years.

[northernladuk]

Oddly the accountancy side has changed in that time and I'd have said a FA accountant would have been the way to go

[TheFaQQer]

Oddly the accountancy side has changed in that time and I'd have said a FA accountant would have been the way to go

I think that InTouch can also offer FreeAgent as an additional service.

[pr1]

So your nominal tax rate is 19 + 7.5, 26.5% - Once you move into the higher tax band it goes up to 19 + 32.5 = 51.5%. Above 100K the personal tax allowance is reduced, above 150K you are on a straight 19+38.1 = 57.1% rate.

nearly, the 7.5%/32.5%/38.1% is on the actual dividend paid (not the profit) so your totals should be

19% + 7.5% - 19%*7.5% = 25.1% basic
19% + 32.5% - 19%*32.5% = 45.3% higher
19% + 38.1% - 19%*38.1% = 49.9% additional