Advice needed please.

[RSTurbo50]

Well, I worked for my local authority last year as a Social Worker and was earning £13 an hour. This position is similar in nature but a temporary contract through an agency. And I have never heard of a cleaner earning £10.50 an hour, more like minimum wage so not sure where your getting that from.....

So to be blunt, Im better off going through the umbrella company as what I am earning is not enough to set up as a PLC??

Stuart

[malvolio]

It depends - as always...

If you are direct, stick to being a sole trader. If you're through an agency, you'll get slightly more back through a Ltd (not a PLC, you've a way to go for one of those... ) than an umbrella. Accountant's fees and umbrella rates will be comparable over a year and you won't make enough to warrant VAT registration. So all things considered, I should stay with the umbrella.

However, you can't claim £10 a day food unless you spend £10 a day on food, no matter what the umbrella tells you. So perhaps a more ethical umbrella, like ContractorUmbrella, Parasol or Gabem, might be a smart move...

[Gonzo]

Well, I worked for my local authority last year as a Social Worker and was earning £13 an hour. This position is similar in nature but a temporary contract through an agency. And I have never heard of a cleaner earning £10.50 an hour, more like minimum wage so not sure where your getting that from.....

So to be blunt, Im better off going through the umbrella company as what I am earning is not enough to set up as a PLC??

Stuart

I am sorry to have to tell you this but you are one of the people that have been ****ed over by the unions and the government.

The government have given greater employment rights to temporary workers at the behest of the unions because it makes temporary workers less competitive.

As a result you have been pushed down the umbrella route which puts you in a worse position than being a temp.

Most of us on here do not like the government very much, I think you are in a position where you would never vote Labour after what they have done to you.

With regards to your question, running a company will cost around £1,000 to £1,500 per year in fees so it is probably not worth it for you.

[Fred Bloggs]

Sad, but true.

[RSTurbo50]

A friend of mine has advised this:

I am being paid £10.50 an hour through an agency to do social work.

I need to set up my own PLC through a Umbrella company (Brooksons iV been told are excellent). I pay myself minimum wage at £5.80 an hour and the remaining I put into the company as assets i.e. £4.70 an hour which would not be taxed. I have been advised that I would only pay tax on the £5.80 an hour.

Is this how it works? Also been advised that I can claim on VAT for fuel I use, if i buy a car for work purposes I can claim tax back on that etc etc...

As stated earlier, its all new to me.

Stuart

[malvolio]

Assuming you're for real, your friend is rather less well informed than even the worst of us. I suggest you (a) read the first timer guides a bit more carefully and (b) talk to an accountant. You're at the bottom end of our experience here, you need professional guidance or risk making an expensive mistake (or two).

But further to my earlier answer, it's a Limited Company, not a PLC, and you can't run one through an umbrella, they are mutually incompatible. If you haven't yet got that much clear in your head, you're in trouble.

HTH

[LisaContractorUmbrella]

Have to agree with Mal on this one - you have been seriously misinformed. The options that are open to you are as follows:

If you are working direct for a company, rather than through an employment agency, you can register as a sole trader.

If you are working through an employment agency you can either set up your own Limited Company or you can work through an umbrella company.

On the rate that you are being paid it is unlikely that you will fall outside of IR35 (this legislation is concerned with the amount of control that the company you work for has over your working practises and there is loads of info. on this site). Therefore, whether you opt for Limited or umbrella your payment method will be the same - PAYE. This means that you will have income tax, employee's national insurance contributions and employer's national insurance contributions taken from your rate. Taking either route you will be entitled to claim certain expenses but you cannot claim for a cost that you haven't incurred i.e. if you only spend £4 on lunch you cannot claim £10.

The payment method your friend was refering to would only apply if your contract fell outside of IR35 and tax would still have to be paid in the form of corporation tax on the profits of the company.

[lje]

I need to set up my own PLC through a Umbrella company (Brooksons iV been told are excellent).

A PLC is a public limited company which has shares which are often sold on the stock exchange. You mean a Limited Company where you own shares but they are not publically traded.

If you use a Limited Company then your company would have a contract with the agency.

An umbrella company can be used instead of a Limited company (not as well as). The umbrella company will have the contract with the agency and will pay you a salary based on the amount of money which your contract has earnt.

I pay myself minimum wage at £5.80 an hour and the remaining I put into the company as assets i.e. £4.70 an hour which would not be taxed. I have been advised that I would only pay tax on the £5.80 an hour.

This is wrong. If you go through an umbrella company all of your money will be paid to you as PAYE. If you go through your own limited company then you have the option of paying a lower salary (but only if you're not caught by IR35). However, even if you do this you will still need to pay corporation tax on the remaining money.

Any money you are paid as salary will have employee's national insurance (around 11% I think) and employer's national insurance (12.8%) which need to be paid in addition to any income tax.

You can pay yourself expenses before the money is taken as salary. It is fine to take 40p/mile for the first 10,000 miles which you travel in a year and a lower rate (25p I think) for the remaining miles. You do not need a receipt for this. You do however need a receipt for any food which you buy and claim back as expenses (even if the umbrella company doesn't need to see the receipts the tax man will want to if they do an audit).

Is this how it works? Also been advised that I can claim on VAT for fuel I use, if i buy a car for work purposes I can claim tax back on that etc etc...

You don't want to buy a company car - the amount of tax you'd need to pay on it would be huge.

[PayMatters]

Subsistence Rates

At PayMatters we have HMRC approval to use their scale rate allowances for subsistence. This means that if a person leaves their home and doesn't return from work until at least 10 hours later then they are eligible to claim up to £10 per day to cover food and drink. This 10 hours therefore covers the mileage that has to be travelled in order to get to and return to the place of work. Therefore provided a person leaves home before 8am and returns after 6pm this would apply.

This £10 is the maximum amount that can be claimed and you must spend at least this to claim this amount.

Although we don't require evidence of receipts for every claim made we do test a sample on a regular basis. We also recommend that people keep copies of receipts in respect of subsistence.

In response to people who comment that a 78% take home seems unrealistic they should note that people on a lower rate are more likely to net a higher percentage take home pay as expenses paid form a bigger percentage of their total payment and also because the person has a higher percentage of tax free/NIC free income. They also pay tax at the lower rate when they pay tax. There are also circumstances around the end of the tax year where we may have been utilising unused tax allowances from a gap in work prior to joining. Therefore it is possible at the start of the new tax year take home could go down.

PayMatters only offer Umbrella Company service and do not offer the limited company option. By working through PayMatters you become an employee of PayMatters. As an employee you benefit from insurance cover and stautory sick and maternity pay.

Our normal practice is to run a comparison between what a person will earn working PAYE through their agency and what they will receive working through us.

This is not a sales pitch just trying to answer some of the the unjust criticism!

(Also I haven't looked into this particular persons case and do not know who they are, I am just answering in general!).

[LisaContractorUmbrella]

In response to people who comment that a 78% take home seems unrealistic they should note that people on a lower rate are more likely to net a higher percentage take home pay as expenses paid form a bigger percentage of their total payment and also because the person has a higher percentage of tax free/NIC free income. They also pay tax at the lower rate when they pay tax. There are also circumstances around the end of the tax year where we may have been utilising unused tax allowances from a gap in work prior to joining. Therefore it is possible at the start of the new tax year take home could go down.

No-one here would argue that 78% take home pay is possible through an umbrella company (or a limited company come to that); indeed we have proved that it is possible to take home 100% of your earnings. What people object to are claims that you can 'earn' more through one umbrella company than you can through another. We all work through PAYE and we can all only allow expenses that are permitted by HMR&C. It is misleading in the extreme to claim anything else.