Moving to limited?

**stek** · 24 May 2016, 11:57

If your go limited and carrying paying youself PAYE you won't gain anything. Just replacing the brolly's fees with accountant's fees.

The savings by going limited are basically dividends are more tax efficient and a rock bottom salary means no (or very little) employees and employers NI.

Rates are important too, with lower rates the benefits of going Ltd are not worth it.

**diseasex** · 24 May 2016, 11:58

Originally posted by alex2900512 View Post

I have just started a 3 month rolling contract and using contractorumbrella. It really bugs me that im losing out on nearly £300 a month compared to paye rates for same daily rate.

How hard would it be to go limited and pay myself a normal salary and pay proper tax. Right now I don't want to do the whole dividens stuff but as long as im atleast making same as PAYE I would be happy.

Even if I had to get an accountant and pay like £100 or something a month I would still be £200 better off.

Is it as simple as opening company, get an accountant and that's it? Obviously I wouldn't do it now as I have just started and don't want to be jumping between different methods. Once my contract is renewed or maybe after a month being here.

If anyone could put some input in, it would be appreciated.

Depends on circumstances so use some calculators available online (google umbrella vs limited calculator). If you are "only" loosing 300 a month then it might not be worthwhile to go limited as theres more costs and headache like hiring an accountant when going limited

**northernladuk** · 24 May 2016, 12:00

Originally posted by alex2900512 View Post

I have just started a 3 month rolling contract and using contractorumbrella. It really bugs me that im losing out on nearly £300 a month compared to paye rates for same daily rate.

How hard would it be to go limited and pay myself a normal salary and pay proper tax. Right now I don't want to do the whole dividens stuff but as long as im atleast making same as PAYE I would be happy.

But the 'dividend stuff' is fundamental to what we do. If you don't want to do that then stay brolly.

Even if I had to get an accountant and pay like £100 or something a month I would still be £200 better off.

That is so simplistic it's not even worth considering. The two are completely different. You can't just compare it like that.

Is it as simple as opening company, get an accountant and that's it? Obviously I wouldn't do it now as I have just started and don't want to be jumping between different methods. Once my contract is renewed or maybe after a month being here.

If anyone could put some input in, it would be appreciated.

So what do you know about IR35, 24 month rule, dividend vouchers, VAT and FRS. You don't want to do dividend stuff, what about RTI you'll have to do. What about the fact you are legally responsible for it all now and have to understand your tax returns and the whole like.

IMO stay Umbrella and do a bit more research. You honestly don't sound like you understand it at all which is the point of brollys.

In the old days it used to be that anything around £30k it was better to stay brolly. Up to 40-50 if you can't be arsed with the hassle it was also worth staying etc. Not sure what that figure is now with the T&S issues and expect it depends heavily on how much it is.

**DallasDad** · 24 May 2016, 22:40

OP I don't think you understand what the deduction relate to.
I bet this so called £300 you think you are losing is actually employers Nic, something that would have been invisible to you as a permie.

So if you go ltd and still do full paye (caught inside IR35 or whatever) then you will still pay the same amount of Nic.

**cojak** · 25 May 2016, 05:31

If you calculate you what you get in your hand vs your day rate, I'll bet you're getting about 65%. Which is the right amount.

Calculate again what you would end up with for 70-72%. That is what you'll end up with if you go Ltd.

Do not fall for those companies that offer you +80% take home, they're lying.

**Drei** · 25 May 2016, 11:39

I bet the umbrella company is taking %50 or %35 minimum out of your daily rate

plus the NIC, TAX, fact that your travel expenses come out of your after tax pay, other expenses etc etc...

At one point I worked it out on basic comparison Ltd vs Perm like for like (least tax efficient way) and it came up about £2.5k difference a year for Ltd. So yeah you are losing out around £2.5k but you still need dividends since your salary will only cover the bear minimum.

**northernladuk** · 25 May 2016, 11:43

Originally posted by Drei View Post

I bet the umbrella company is taking %50 or %35 minimum out of your daily rate

plus the NIC, TAX, fact that your travel expenses come out of your after tax pay, other expenses etc etc...

Are you willing to put money on that?

At one point I worked it out on basic comparison Ltd vs Perm like for like (least tax efficient way) and it came up about £2.5k difference a year for Ltd. So yeah you are losing out around £2.5k but you still need dividends since your salary will only cover the bear minimum.

You've got to bear in mind the OP might be inside IR35 or below the threshold to make it worth going LTD as well. The rolling three month contract sets the alarm bells going but granted we'd need more detail.

**LondonManc** · 25 May 2016, 12:06

Rolling 3 month contract eh? Sounds like a disguised perm role - expect to be within IR35, in which case you may as well stay umbrella and enjoy the hassle free side of contracting.

**Drei** · 25 May 2016, 13:26

Originally posted by northernladuk View Post

Are you willing to put money on that?

Made the assumption that the OP got a contract via an Agency on a 3 month rolling. The agency did so with someone I knew a while ago, 3 months rolling with the NHS. The umbrella agency was taking %30 from their daily rate. The person was on £128 a day and the agency was charging the client £185. Eventually they gave the the agency the boot and went direct charging £250 a day.

Moving to limited?