Outside to Inside Checklist

[fiisch]

As-is: Outside IR35 £700 p/d, since August 2024. Limited Company with two shareholders, both taking salary + dividends (YTD c. £31k dividends taken by each shareholder). No Directors' Loans. Two EVs on company lease. Ltd Company Year End was 30th September. Dad to two primary-school aged children. £6k retained company profit.

(I know I know, warchest is much too light, but I have some additional personal savings / am going through a period of 2.5 more years of very high personal expenses).

To-be: Inside IR35 £850 p/d via Parasol. I am hoping to work on outside IR35 engagements in the future.

Question: My contract was unexpectedly terminated with two weeks notice and I've been lucky enough to quickly land an alternative contract with a small consultancy on an Inside IR35 basis operating in the same industry. I've worked one Inside IR35 contract previously during Covid silly season on a much lower rate (£550), but wanted to check with the hive mind if there's anything missing from my considerations?

• Check personal finances - is it affordable to "repay" some of the dividends taken this year? (i.e.: reclassified as a Directors' Loan) to minimise this year's tax bill? (Repaid 50/50 with additional shareholder who does not have alternative income).
• Calculate / advise umbrella on maximum possible pension contributions (ideally to take income below £150k additional rate threshold).
• PI insurance - recently renewed. Cancel or leave running?
• Engage with Parasol - advise not to retain funds for "paid" holiday.
• Expect larger than usual personal tax bill from self assessment of 2025/2026.
• Cancel salaries from ltd co ASAP and place ltd into dormant state.

Is there anything else I am missing please? I appreciate with the EV leases (and potentially continuing second shareholder salary) I am going to need to top up the funds in my ltd co by reclassifying at least some of the dividends from this year as a Directors' Loan.

(This is after speaking with my accountant and running the pre-requisite forum search )

[ladymuck]

Be careful with dormancy. If you're using the company to make payments on the EVs on lease then it's not dormant. Not trading is not the same thing as dormant.

I would keep PI insurance running but ask for a run-off policy. Check your contracts for any requirement to cover liability claims after the contract has ended. Some may say that you could be held liable for up to two years after the end of the contract, for example. If your last couple of contracts don't have that I'd maintain something for a couple of years, just in case.

[Protagoras]

I was wondering about the paid holiday. I think typically, umbrella companies allow about 12% for this.

Is it possible / desirable to have an umbrella company retain this and then pay it the following tax year when 'holiday' is taken?

Obviously depends also on the length of the engagement.

No idea whether this is possible, I've never seen it discussed.

[hobnob]

A few thoughts:

If the limited company's year end was 30th Sep, have you (OP) already submitted the year end return, or is that still pending? You might want to delay that for as long as possible, to give you more flexibility about how you classify the dividends vs director loan. However, I assume that your company was VAT registered (i.e. your daily rate would take you over the threshold), in which case you'll need to lock the accounts for each quarter. So, have a word to your accountant about what they can unlock to make changes.

I use an Excel file for my personal tax assessment each year, i.e. these figures should match the SATR that I eventually submit. If you aren't already doing that, I recommend setting one up, then you can make a few copies to play with different scenarios.
NB You mentioned the £150k threshold (which was the case a few years ago), but additional rate is now payable above £125k. See:
Income Tax rates and allowances for current and previous tax years - GOV.UK
Also, your personal allowance will start to reduce as soon as your adjusted net income goes above £100k.

I assume that Parasol will do autoenrollment for their pension scheme. Make sure you opt out of that so that you can do salary sacrifice instead (which will save you money on employer's NI contributions).

You mentioned that the company's retained profits are essentially the warchest. I recommend doing something similar with your umbrella company. I.e. rather than getting them to pay money directly into your (main) current account, have a secondary current account which they pay into; this will be irregular amounts, e.g. when you have a 4 day week for a bank holiday. Then set up a standing order to transfer your take home salary into your main account. You might need to do this weekly at first, until you've got enough of a surplus to do it monthly. There are 2 advantages to this:
a) It will make your personal budgeting easier, because you'll know how much money you have coming in each month (rather than good weeks and bad weeks).
b) When you look at the balance of the second account, you'll know at a glance how much bench time it will cover (i.e. you just have to divide it by the weekly or monthly transfer amount).

The EV situation might get complicated. I assume that you and the other shareholder have one each? Their vehicle presumably counts as a BIK (if they didn't do much driving for the company). Yours might not have counted in the past, but it probably will now (e.g. if you use it to commute to the new contract). I'd also check the wording on your insurance policies.