Public sector.... switch to umbrella, really?
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  1. #21

    Some things in Moderation

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    Quote Originally Posted by lucycontractorumbrella View Post
    Believe me, I am getting calls left, right and centre where contractors are "just hearing about this", and many that have not even considered that the work in March will need to be paid before 6th April. I know sometimes brollies are not overly popular, but as HMRC squeeze more and more people under employment taxes it is an option to consider. I am seeing more and more opting for the pensions route, so they can gain some tax saving.
    Could you write a quick note explaining how pensions work with umbrellas Lucy?

    I'll make it a sticky if you do.

  2. #22
    eek
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    From a conversation with Lucy regarding just that - I',m posting it here because of question 2

    1)Am I correct in saying Salary Sacrifice is always better than trying to reclaim pension contributions via self assessment due to National Insurance.

    1. yes salary sacrifice is the best way to do it, as putting it through self-assessment will only see the income tax benefit I believe.

    2) Were I to use an umbrella for 3 months and wanted to sacrifice my entire salary into my pension is that achievable....


    2. No, we have to ensure that the contractor stays above NMW, so they would have to receive NMW after deductions (ie Employers NI, pension, and our margin), the rest could then be put in a pension up to the maximum amounts for the year (which I think currently stands at 40k for the year).
    merely at clientco for the entertainment

  3. #23

    More time posting than coding


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    Quote Originally Posted by likewise View Post
    local. Ive been looking into it and out of a weekly earning of 1100, various umbrella companies are offering me take home pay of between 680 and 730
    With a reputable brolly you're typically looking at 60-65% take home net.

    60% x 1100 = 660
    65% x 1100 = 715

    Since April 2016 'no' expenses are tax deductible through a brolly - any travel/accommodation/subsistence etc. must now come out of your own pocket. Ouch.
    If the gig's 'on your doorstep' all well an' good, long distance contracts are now not so attractive.

    e.g.
    Assuming another public sector contract comes up 150 miles away and outside London, you might have the following weekly expenses:
    Petrol Mon morning to site: 20
    Petrol Fri back home from site: 20
    4 nights premier inn: 200
    Petrol to/from hotel and site: 10
    Food: 30

    Total
    280

    That reduces a 660/week down to 380.

    FYI: The UK minimum wage is 7.50/hour - a 40 hour week on minimum wage brings in approx 283 net.

  4. #24

    More time posting than coding

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    Quote Originally Posted by SunnyInHades View Post
    Since April 2016 'no' expenses are tax deductible through a brolly - any travel/accommodation/subsistence etc. must now come out of your own pocket. Ouch.
    If the gig's 'on your doorstep' all well an' good, long distance contracts are now not so attractive.
    Just worth mentioning that although the non-chargeable expenses (ie the ones that were previously used for tax relief purposes) are no longer allowable at source via the umbrella, we can still process chargeable expenses (ie the ones the client will agree to reimburse in full). These will go through on the invoice, with no tax applied when they are paid back to you with your salary, so if there are any chargeables that you can agree with the client, then don't forget we can still process these.
    Just watching what I say

    We now offer Ltd too, so if you need a company that you can switch between Ltd & Umbrella, just shout!

    Connect with me on LinkedIn

  5. #25

    Still gathering requirements...

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    Quote Originally Posted by eek View Post
    From a conversation with Lucy regarding just that - I',m posting it here because of question 2

    1)Am I correct in saying Salary Sacrifice is always better than trying to reclaim pension contributions via self assessment due to National Insurance.

    1. yes salary sacrifice is the best way to do it, as putting it through self-assessment will only see the income tax benefit I believe.

    2) Were I to use an umbrella for 3 months and wanted to sacrifice my entire salary into my pension is that achievable....


    2. No, we have to ensure that the contractor stays above NMW, so they would have to receive NMW after deductions (ie Employers NI, pension, and our margin), the rest could then be put in a pension up to the maximum amounts for the year (which I think currently stands at 40k for the year).
    Regarding point 2, anyone able to give an example? I had this bright idea that I could switch to a brolly (due to working for a public client), then 100% salary sacrifice and then have my limited company (plenty of retained profits) pay me a small salary (whatever the tax free allowance is changing to) and any divs (only if tax efficient) to live on. No idea if this is allowed but sounds good to me

    I'm guessing it still kind of works without the 100% salary sacrifice as I'd be able to put 40k worth as salary sacrifice through the brolly but as the NMW accounts for approx 14k already then I may not get as much benefit from extracting the limited company money. I'm reading the above that you still get the tax benefits from putting as much pension as you can away whilst still leaving enough for the NMW and the tax and NIs etc is only on the smaller amount.

  6. #26
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    Quote Originally Posted by mashetti View Post
    Regarding point 2, anyone able to give an example? I had this bright idea that I could switch to a brolly (due to working for a public client), then 100% salary sacrifice and then have my limited company (plenty of retained profits) pay me a small salary (whatever the tax free allowance is changing to) and any divs (only if tax efficient) to live on. No idea if this is allowed but sounds good to me

    I'm guessing it still kind of works without the 100% salary sacrifice as I'd be able to put 40k worth as salary sacrifice through the brolly but as the NMW accounts for approx 14k already then I may not get as much benefit from extracting the limited company money. I'm reading the above that you still get the tax benefits from putting as much pension as you can away whilst still leaving enough for the NMW and the tax and NIs etc is only on the smaller amount.
    My very rough estimate is that the national living wage (7.50 an hour from April) would take 299 a week from your pay packet and there would be enough 30 or so deducted for umbrella fees. That probably is slight on the high side as the calculation was (7.50*35*1.139) of which 13.4% is employers NI and 0.5% the apprenticeship allowance....

    Hence you could throw everything bar 329 a week into a pension....
    Last edited by eek; 28th February 2017 at 21:29.
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  7. #27

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    Quote Originally Posted by northernladuk View Post
    It's starting!!!! Hold on everyone....
    Yes indeed. These are just the early rumblings!

  8. #28

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    Quote Originally Posted by LondonManc View Post
    Have a look at this:
    http://forums.contractoruk.com/umbre...ey-differ.html

    Lucy from Contractor Umbrella explains the reasoning behind it.

    Going perm sounds best for you.
    If you are prepared to put up with all the rubbish that this entails then I agree, going perm does sound like your best option.

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