Pension carry forward (when moving from Ltd to Umbrella)

[MillennialContractor]

Hi All,

Having almost accepted my fate that my next role will be inside IR35 due to blanket bans (if I don't want to sit on the bench), I'm looking at my best options regarding surplus cash / MVL.

I keep seeing contradicting information on the carry forward pension allowance - maybe more aimed at perm or LTD director in isolation and not the situation of transitioning from LTD to umbrella worker.

After tax I have circa 100k in the business and for multiple reasons (mostly expecting to close my company every time my contract ends and I'll sort it out later) have made no contributions over the last 3 years to my SIPP.

I appreciate as a permie you can contribute personally up to the level of relevant income you have earned in that year (dividends not included) and I understand a company can more or less contribute what they like within reason up to your carry over limit. I want to be sure (as just now I have the option of using the surplus cash in my business and reducing my corporate tax bill by paying directly into my pension), given over the last few years my qualifying income as directors salary will have been circa £9096, can I ask my umbrella to take advantage of 180k (40+40+40+60) of pension allowance through salary sacrifice or will that be reduced due to taking most of my pay as dividends?

Any help would be greatly appreciated.

[northernladuk]

Be wary of making the same mistake a lot of people made and it cost them. One inside gig is not the end of your career. Many people MVL'd out off the back of the news the world was going inside and it didn't pan out well. They did one gig, went back outside and found they couldn't open another LTD for two years. Very silly and very expensive mistake.

It's one gig, do the gig, see what happens to the next one and then make a decision based on a longer view. Do some tax planning for the final eventuality as you get used to inside gigs and then make an informed and appropriate decision based on your career, not an individual gig.

[MillennialContractor]

Thanks Northernladuk - appreciate the feedback,

I was worried for a long time about the same, but over the last two years I've not had a single sniff of an outside role (not without a huge rate cut for the privilege) - thankfully I've been extended several times at the current client outside IR35, but I religiously apply for other roles as if I'm on the bench 6week to go, unless I've signed the extension. I wonder if 'business analyst' is in the minority for truly outside roles.

I'm starting to think I may as well get that 2 year clock started and hope with the offset rules and some political miracles the tide will change or clients will become less risk averse.

I'm probably a little fortunate in that I can put nearly my whole rate into pension for the first year and I'm thinking maybe take advantage of MDV while its still around. I've also got an itch to scratch with other business ideas so maybe this is the time to take the plunge potentially.

More than anything I'm getting sick of educating recruiters on IR35 knowing there's no way they're having the same conversation with the end clients!

[northernladuk]

Thanks Northernladuk - appreciate the feedback,

No problems. Happy to jump on any topic to show off how uneducated and clueless I am Once in awhile I get it right.

I was worried for a long time about the same, but over the last two years I've not had a single sniff of an outside role (not without a huge rate cut for the privilege) - thankfully I've been extended several times at the current client outside IR35, but I religiously apply for other roles as if I'm on the bench 6week to go, unless I've signed the extension. I wonder if 'business analyst' is in the minority for truly outside roles.

Not being rude but from what I've seen business analyst is a bit of a catch all term for anyone doing random stuff on projects so understandably going to be inside. That type of role will always be under D&C, MoO etc. A big gap between most BA's and a 'proper' BA. When you've seen a proper BA you'll know. Same in the PM world. The percentage of 'proper' BA roles for large programmes compared to general dooer BA's must be tiny and then the proper ones that could be argued outside get dragged in to the pot with the rest.
So I'm not surprised it looks a bit bleak and doesn't make sense but to be fair there has been absolutely nothing for me on the job boards for a week now which is unheard of usually so could be bad market, clients not understanding what a BA is and IR35 fear.

I'm starting to think I may as well get that 2 year clock started and hope with the offset rules and some political miracles the tide will change or clients will become less risk averse.

I'm probably a little fortunate in that I can put nearly my whole rate into pension for the first year and I'm thinking maybe take advantage of MDV while its still around. I've also got an itch to scratch with other business ideas so maybe this is the time to take the plunge potentially.

That's great. You've considered the long term impact to you so no surprises so you are way ahead of many of the knee jerk MVL's we see. If you are happy with what could be the worst case if you do MVL now then go for it. Get some proper tax planning advice and fully understand the MVL. Try speaking to Chris Maslin at MVLOnline who is also a contractor accountant so knows both sides of the penny which will be useful.

More than anything I'm getting sick of educating recruiters on IR35 knowing there's no way they're having the same conversation with the end clients!

That was pretty pointless in the old days let alone now. That ship has sailed as they no long need to know so will put less effort in to understanding it than ever. Stopped doing that years ago. Agent is going to get their cut either way so why would they go back and pester their clients.

[MillennialContractor]

Not being rude but from what I've seen business analyst is a bit of a catch all term for anyone doing random stuff on projects so understandably going to be inside. That type of role will always be under D&C, MoO etc. A big gap between most BA's and a 'proper' BA. When you've seen a proper BA you'll know. Same in the PM world. The percentage of 'proper' BA roles for large programmes compared to general dooer BA's must be tiny and then the proper ones that could be argued outside get dragged in to the pot with the rest.
So I'm not surprised it looks a bit bleak and doesn't make sense but to be fair there has been absolutely nothing for me on the job boards for a week now which is unheard of usually so could be bad market, clients not understanding what a BA is and IR35 fear.

Not rude at all - a separate rant but I've noticed it seems to a a two pronged problem - despite (IMHO) being one of the more experienced/specialist project based BAs, 90% of recruiters still advertise all roles as plain old 'BA' so I cant differentiate myself too much and risk not coming up on their (keyword) search or cast my job alert net too narrow and unfortunately there's too many general dogsbody / wet behind the ears BAs willing to take any status at half the rate to muddy the waters! Funnily enough I spoke to a chap at Danbro's this week who said he'd noticed a real uptick in a new type of contractor, new to the industry and more than happy to take inside roles (brilliant news - more downward pressure!).

Thanks a lot for the recommendation, much appreciated I'll definitely get in touch. Likewise I noted you recommended Clarity on another thread - I'll see if I can tempt the agency to engage.

That was pretty pointless in the old days let alone now. That ship has sailed as they no long need to know so will put less effort in to understanding it than ever. Stopped doing that years ago. Agent is going to get their cut either way so why would they go back and pester their clients.

Ha, I think deep down I knew this, but hell it gave me a chance to blow off some steam once in a while!

[northernladuk]

Thanks a lot for the recommendation, much appreciated I'll definitely get in touch. Likewise I noted you recommended Clarity on another thread - I'll see if I can tempt the agency to engage.

Speak to Lucy at Clarity and get her to speak to the agent. Unlikely they'll add them if they aren't on the PSL on your say so. There will be onboarding and compliance checks on the brolly and Lucy can deal with that directly

Ha, I think deep down I knew this, but hell it gave me a chance to blow off some steam once in a while!

I feel you there.

[Smartie]

Just to add an alternate perspective, I MVL'd a couple of years ago and entirely happy I did.

You need to assess the risk, but getting at your money with 10% tax is very nice. Almost as good as banging it in your pension.
It can sit happily in an offset mortgage, reducing the interest and doubling as a warchest.

On the BA role, it's a very very broad description covering a very wide set of skillsets.
The description of generalists could equally apply to PMs and Devs.
I've had no issues finding suitable roles, yet.
We just need to adapt to the new reality and ensure we distinguish ourselves in a market that has become pretty saturated.

[Ketto]

I took an inside role in August and seriously considered doing an MVL…. Was in an outside role by December!

[MillennialContractor]

@Smartie I've got a renovation needs paying for too so might not be a bad time to take out a lump sum at low-er tax rates, who knows maybe VAT threshold will even be raised in two years!