Newbie Help - Contract work as well as permanent job

[GB2408]

Hi again all,

Thanks for the help. I have opted to register as a sole trader as this is the cheapest in terms of no start-up costs etc. The contract employer is OK with this.

I have written approval from my manager in my permanent role to do this work, bonus

The contract is 3 - 4 days a week and will return around £8K. Due to the location I will rack up around 200 miles per day which, claimed back at 40p a mile, will equate to around £2K plus other expenses (meals whilst over there etc) I will therefore only be liable for tax on around £5.5K.

This very narrowly puts me into the higher rate tax bracket but only just, I can live with 40% tax on the last couple of £K.

Roll on next week

[GB2408]

OK.. There has been a few changes to this. Turns out the agency cannot pay to a sole trader only to a LTD.

I need help working out what I will take home!

The contract is still £300 a day but will be 3 or 4 days a week and will now go on for around 25 weeks.

Is it worthwhile setting up my own LTD?

As I already earn around 42K (based on the last couple of years, and my projection for this year.. But it will be a minimum of £37K-ish) from my permanent role, what can I legally take home from the £300 a day contract?

I would also be claiming £80 a day in fuel and £30 in other expenses (roughly - Parking, meal, and have included accounts fee etc).

Does it mean I will only be taxed on £190 a day? If I already pay tax and NI on a permanent role would I be able to pay myself the £300 in just expenses and dividends?

[SallyPlanIT]

OK.. There has been a few changes to this. Turns out the agency cannot pay to a sole trader only to a LTD.

I need help working out what I will take home!

The contract is still £300 a day but will be 3 or 4 days a week and will now go on for around 25 weeks.

Is it worthwhile setting up my own LTD?

As I already earn around 42K (based on the last couple of years, and my projection for this year.. But it will be a minimum of £37K-ish) from my permanent role, what can I legally take home from the £300 a day contract?

I would also be claiming £80 a day in fuel and £30 in other expenses (roughly - Parking, meal, and have included accounts fee etc).

Does it mean I will only be taxed on £190 a day? If I already pay tax and NI on a permanent role would I be able to pay myself the £300 in just expenses and dividends?

You should have the choice of either an umbrella company or limited company. With this level of income, if the contract were to be outside of IR35 then ltd company is the best route as you could take dividends which the higher tax rate is 32.5% as opposed to 40% on earned income through PAYE.

However, that depends on IR35.

If you are inside IR35 then we have a calculator comparison between umbrella and limited that you fill in a quick form and it will email you the calculation. Please feel welcome to use it, it's on our website, please PM me if you need a link.

[GB2408]

You should have the choice of either an umbrella company or limited company. With this level of income, if the contract were to be outside of IR35 then ltd company is the best route as you could take dividends which the higher tax rate is 32.5% as opposed to 40% on earned income through PAYE.

However, that depends on IR35.

If you are inside IR35 then we have a calculator comparison between umbrella and limited that you fill in a quick form and it will email you the calculation. Please feel welcome to use it, it's on our website, please PM me if you need a link.

Hi,

Thanks for the reply - The contract is definitely outside IR35. It is a fixed term project delivering an agreed service.

[SallyPlanIT]

Hi,

Thanks for the reply - The contract is definitely outside IR35. It is a fixed term project delivering an agreed service.

Then limited company is the best option saving you both tax and NICs on dividends. You can do an incorporation within 24 hours, bank account around three working days and then you're ready to go. VAT and PAYE applications take longer to come through, but won't hold up you invoicing.

Good luck