LTD or Umbrella for Outside Contract if paying max to Pension

[eldy]

Hello,

I have been offered an Outside IR35 contract today, SDS will be provided by the end client as Outside, so will need to open a LTD company.

I've actually been operating via Umbrella at moment, paying max salary to SIPP via Salary Sacrifice (Aware of the 40k max per year, 160k backdate 4 years rule)

I'm quite happy with this arrangement, no need to operate a business bank account, no need to deal with an Accountant or HMRC, and minimum wage is more than enough for me to live on, so am considering using the Umbrella instead.

But I am quite curious to know what the monetary benefit would be if I continue to operate paying the maximum to my SIPP but via a LTD instead, which would give me control over my PAYE payments as well, probably no dividends left to pay myself, no or little corporation tax to pay.

Would it then just be a matter of comparing the tax I pay on 18k of minimum wage paid via Umbrella vs 8k(?) PAYE variable I would pay myself if via LTD ?

Also is this the clawback clause that has been discussed on this forum that I need to watch out for in my contract?

"The Contractor shall be liable for and shall indemnify the Company and the Client for any Losses suffered or incurred as a result of any claim, demand or assessment made by HMRC (or the equivalent body in the Relevant Jurisdiction) for Tax relating to any Representative."

If I pay max to my SIPP in the LTD - I assume there would be very little to pay HMRC if this clause was invoked?

Also could I switch from Umbrella to LTD any time I want If I have a confirmed Outside SDS from the client ?

[Lance]

8.75% dividend tax up to c. £50k
£2k dividend free of any tax
No NICs

LTD will always be better albeit by margins not huge chunks.
If this is just for one short term gig then don't bother with a LTD (cost of startup is low, close down can be more costly and a pain in the arse). If it could be several years of outside gigs then absolutely go LTD. Talk to an accountant (there's a thread on recommendations) and get an illustration of the monies.

[eek]

And not just an illustration of how things are now but with the post April 2023 rates that increase the corporate tax take for profits above £50,000 to £250,000 to 26,5% rather than than 19%

[Protagoras]

If this is just for one short term gig then don't bother with a LTD (cost of startup is low, close down can be more costly and a pain in the arse). If it could be several years of outside gigs then absolutely go LTD. Talk to an accountant (there's a thread on recommendations) and get an illustration of the monies.

+1

The liability clause, and the risk of outside to inside before first Client payment, make the LtdCo option less attractive.

I'd suggest that you compare the retained income of Ltd vs Umbrella in the context of your risk appetite.