HELP LTD Company VS Umbrella

[mwoz03]

Hi all

I am not sure how to start a new posting so have piggy back on this one - hope the original poster won't mind.

I have read some postings and finally found this post again =) Thanks for all have posted they were great help, espeically about umbrella companies
I would appreicate if I may ask for some advise.

I have setup a limited company but as I seem to be more out of contract then being in a contract, I was wondering how I can calculate my net pay, ie whether I am better off using a limited company or an umbrella company?

1/
Since 6 April, I have been lucky and started a £250/day rate contract from 12 Apr 2010 but have been told today that it will end on 30 Sept 2010 (nearly 6 mths contract) and so fat not managed to get an interview for another contract (and there was an eight month gap between my last contract)

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LIMITED COMPANY
================

My accountant tells me:

My limited company is liable in 3 things
• Corp tax - keep 16 to 17% of whatever invoice charged
• VAT - only on income whatever I have collected
• Paye ni- only when I have run a payroll
• accountancy fees and insurance -

I was wondering whether anyone would mind helping me out to calculate whether I should go umbrella or stay limited

I am basing this on working 48weeks /year = £250 x 5 x 48 = £60,000

Corp tax at 20% = £12000
PAYE £400pcm x 12 = £4800pa (I pay myself £1000pcm and the rest by dividends)
Accountant monthly fixed fee of £80 + VAT x 12 = £1128 (plus £100 Self assessment optional, 12mths minimum charged)
My insurnance monthly payment: TLC (IR35 cover): £35 + Professional Indemity £12
Total insurance £564 pa


TOTAL deduction £18420 pa

Am I correct in thinking £60000 - 18420 = net £41580

======================
UMBRELLA COMPANY
======================

Do I only need to calculate
1/ what the umbrella company fees are and that's it?
as the cheapest one I can find is £26.50 weekly (gross) which includes insurance but as I just read the other postings which mentioned tax etc which I am liable I am not sure which route I should take, I read somewhere if the income is more than £25000/year then Ltd Company is the way to go.


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ON ANOTHER NOTE
================
I have only submitted my timesheet for the first 9weeks (apr - jun) as I had problem with my bank account so those weeks were paid into my limited company, but have not pay to my personal account yet. If I decide to go umbrella company will I have to still do my accounts myself or can I redirect the payment so that I don't.

Just looking at the amount of PAYE and corporation tax I have to pay, makes the Umbrella company route looks better but then if it is better why are so many using limited companies?
one other question, why do the umbrella company include the 'employer's NI' in their breakdown as if I have to pay for that?

Update: I have tried a number of online calculators but they all give me the 'basic input' just want to know which ones is a better one to compare with umbrella companies.


Thanks for reading and any help would be appreciated.

M

[Steven@Parasol]

The FCSA (Freelancer and Contractor Services Association) has launched a new umbrella calculator which will help you calculate your take home pay if you worked via an umbrella.

I've pasted a link below and any of the FSCA member providers can take you through the calculation over the phone.

Take home pay calculator - Parasol

Hope this helps.

[LisaContractorUmbrella]

Below would be your weekly take home pay, assuming you are on a standard tax code and no expenses:

Income 1250.00
Expenses 0.00



Employer's NI 126.35
Employee's NI 83.26
Employee Tax 244.69
Total All Tax 454.30
Fees 26.50
Total Net Income 767.82

Based on this your take home for 48 months would be £36,855.36 from £60,000; obviously this figure could rise depending on your personal tax circumstances and whether or not you will be incurring expenses. Your figures also assume that you will be outside of IR35 - have you had your status verified?

[malvolio]

Errm... We made this post a sticky for a reason. Go and read it.

http://forums.contractoruk.com/accou...composite.html

As a rule of thumb, you will always get more net income from your own limited than any other solution that doesn't involve dodgy offshore schemes, even inside IR35.

[lje]

Note that you are responsible for employer's national insurance as well as employee's. You will pay this on the salary which you pay yourself from a limited company but not from the dividends. You are an employee of the limited company and so the limited company has to pay the employer costs.

You will also pay employer's national insurance (as well as employee's) on money you get from an umbrella company. In fact this is where the biggest financial difference comes because all of the money from an umbrella company comes as salary and so you have to pay NI and PAYE on the whole lot - there are no dividends. Note that this only makes a big difference if your contract is outside of IR35.

[lje]

And also, your corportation tax is due on the profit which you make (revenue - expenses - salary - employer's national insurance) not on the revenue received, so it will be lower than you calculated.

[ASB]

Approximately:-

Turnover 60,000

Expenses

Salary 12,000
Er's NI 803
Accounts 1128
Insurance 564

Gross Profit 45505
Corp Tax 9556

Retained 35949 (could be paid as dividend).

Your net could therefore be 10204 from (net) salary plus up to 35949 of dividends.

In this case you would have GROSS income of 12,000 + 39,943 gross dividend = 51,943. Assuming normal personal allowance anything over 43875 is at higher rate. By my calculations there is 2,017 of higher rate tax to pay.

So your overall net could be:

10204 + 35949 - 2017 = 44136.

This does assume you are outside IR35. You don't have to take all the surplus funds of course.

[northernladuk]

This does assume you are outside IR35. You shouldn't take all the surplus funds of course.

I only being pedantic highlighting this as there is another thread ongoing about shortage of warchest