Confusion all round!

[Sundial]

Bear with me on this one as it snuck up unexpectedly due to my naiveite!

I had started working in IT through an agency, really enjoyed it, they paid me weekly after deducting NI & tax.

However that contract came to an end and I applied for a job in the same sector recently, via a different agency, have been offered the job...but it turns out I will need to go through an umbrella company! I've never been paid this way before and was a bit taken aback, especially as it hadn't crossed my mind that it might be paid this way, and the agency didn't mention it beforehand (only the hourly rate).

I tried the online calculator of an umbrella company my new agency recommended, and as I don't have much in the normal way of work which would be offfset as expenses, was absolutely horrified at the amount of tax which will come off (NI employee & employer, income tax etc).

I've been hearing a lot about setting up a Limited Company but am worried about IR35- my position is to cover a temporary growth in workload so doesn't cover a permanent position in that sense, but I take it that it's not that straightforward..?

Any advice appreciated

[malvolio]

Too much to answer simply, so first go read the guides - one on here, one at www.pcg.org.uk. Then ask questions - you will be amazed at how much you don't know. For one thing, your last gig was as an agency temporaray employee, not as a contractor.

But LtdCo is nothing to be scared of, nor is IR35. And nor is an umbrella, which is a good starting point while you fnd out how it really works.

[expat]

... I applied for a job in the same sector recently, via a different agency, have been offered the job...but it turns out I will need to go through an umbrella company! I've never been paid this way before and was a bit taken aback, especially as it hadn't crossed my mind that it might be paid this way, and the agency didn't mention it beforehand (only the hourly rate).

I tried the online calculator of an umbrella company my new agency recommended, and as I don't have much in the normal way of work which would be offfset as expenses, was absolutely horrified at the amount of tax which will come off (NI employee & employer, income tax etc).
...

1. What Malvolio said.
2. Is the problem simply that you are horrified at the amount of tax which will come off? So are we all, but that happens whether you are Ltd Co, Umbrella, Agency employee, or indeed client salaried employee. You just don't see the full impact in some of those cases: if the population as a whole only knew how much tax they are really paying, they would revolt.

If this new agency is offering you a rate that doesn't sound so good after you've calculated the government bite, compared to the last job, that is a different matter: it's called not being paid enough. Regrettably there are agents out there for whom that is the centrepiece of their game plan.

Or is it that it looks complex? It isn't really, but you do need advice. Read the sticky postings and the guides here. For Ltd Co, get an accountant; for Umbrella, read advice here. And possibly join the PCG.

[Clippy]

Can't add much more to what our learned friends have said but if it sounds that some of your un-certainty may be tied up with whether you wish to be a contractor in the long term.

If so, maybe an umbrella is the way to go until you have made your mind up.

[Sundial]

Then ask questions - you will be amazed at how much you don't know. For one thing, your last gig was as an agency temporaray employee, not as a contractor.

I'm definitely stunned at how much I don't know!! Yeah I realise the last one was as a temporary employee, I think that as I'm still in that 'mindset' it was a shock that I'd got a job as a contractor by accident and need to do some research. Darn, no easy answer!

2. Is the problem simply that you are horrified at the amount of tax which will come off? So are we all, but that happens whether you are Ltd Co, Umbrella, Agency employee, or indeed client salaried employee. You just don't see the full impact in some of those cases: if the population as a whole only knew how much tax they are really paying, they would revolt.

If this new agency is offering you a rate that doesn't sound so good after you've calculated the government bite, compared to the last job, that is a different matter: it's called not being paid enough. Regrettably there are agents out there for whom that is the centrepiece of their game plan.

It was a shock about the tax, and yes, you're right about 'hidden' taxes, see this is still the 'employee' mindset. If I'd known I would have asked for more (I thought I was being demanding as it was ) but I guess I can't blame the agency for my lack of experience in this area.

Can't add much more to what our learned friends have said but if it sounds that some of your un-certainty may be tied up with whether you wish to be a contractor in the long term.

If so, maybe an umbrella is the way to go until you have made your mind up.

I think I will do this for the next few weeks, at least!

Thanks for your responses, I had some contradictory advice from contractors at work today and am getting a bit confuzzled...at the very least this contracting job is for an organisation I've always wanted to work for, and I like the work, so I'll just have to plough through all the info and try to find where I want to take it.