Setting up Limited

[fayraz]

Hi,

Looking at setting up a Limited company instead of going through an Umbrella. I am a bit confused about the tax implications; personal TAX, corporation TAX?

Can someone give me a rough idea about how much tax I would pay on a £21000 contract?

Thanks.

[administrator]

Before making a decision read the first timers guide:
Contractor UK :: First Timers Guide - for IT Contractors

At £21K it is hardly worth the hassle of a limited company but if this is £21k for a three month contract and you are confident you will get more contracts rather than go to a permanent job then it is worth thinking about.

Go read the guides and come back if you have any questions. If you think limited is not the option for you just now then try one of these Umbrella Companies to go through this contract with.

[Craig@Clarity]

Hi Fayraz,

It all depends on your salary and expenses. In basic terms, the company has to pay 21% (20% from 1 April) corporation tax on it's profits which is worked out by taking your £21k less gross salary less expenses. Depending on what level of salary you pay yourself depends how much tax and NI you pay i.e. no income tax, 20% tax or 40% tax.

To setup a company, I assume you would be a director and shareholder, so you would be required to complete a self assessment tax return each year which gives you the opportunity to declare the income you receive.

[LisaContractorUmbrella]

Hi,

Looking at setting up a Limited company instead of going through an Umbrella. I am a bit confused about the tax implications; personal TAX, corporation TAX?

Can someone give me a rough idea about how much tax I would pay on a £21000 contract?

Thanks.

Afraid we would need more information - how long is the contract, what other earnings have you had this year, is the contract inside or outside IR35 etc etc

[fayraz]

Afraid we would need more information - how long is the contract, what other earnings have you had this year, is the contract inside or outside IR35 etc etc

Its a 11 month contract, no other earnings this year and I'm not sure about IR35.

[Craig@Clarity]

I would perhaps look at a brolly as your first step into contracting based on your contract length and value unless you plan to take concurrent contracts.

[LisaContractorUmbrella]

I agree with Craig on this one, an umbrella would be the best idea for you, at least for the first few months. For future reference IR35 determines whether or not your earnings all need to be processed through PAYE (you will then pay income tax, employee's and employer's NI) or whether you can draw dividends. There is loads of stuff on the forum about IR35 and the first timers guide is a definite must

[Wanderer]

Its a 11 month contract, no other earnings this year and I'm not sure about IR35.

Have you considered that you will not be paid for holidays, sickness, pension etc and that you could have your contract terminated at short notice? They may even tell you they have no work for you to do this week and you won't get paid. Contracting is a tough world at times.

Also, run the figures through the contracting calculators on the web to see how much your umbrella take-home pay will be and compare that to what you could expect to earn in a permie position on a salary. What is not always immediately obvious is that you will pay employers NI on your gross contract income so you cannot compare 21k in contracting income to 21k from a permie job - on the contract you will pay more tax so you want to be paid more, not to mention extra pay to cover holidays/sick etc.

I don't want to sound disrespectful but 21k for an 11 month contract is strictly entry level in this business. You should seriously look at if you should be taken on as a permie, perhaps at a slightly lower rate but with permie benefits. Make sure that you are going to be a genuine self-employed person and that they aren't just taking you for a ride by offering it as a "contract" role so they can wriggle out of their obligations as an employer.

If you are sure you know what you are doing and you are bold and brave enough to work as a self-employed contractor then that's cool, good luck to you! I just don't want to see people get messed about by dodgy employers...

[fayraz]

I was going to get paid via PAYE through an agency and I was going to get paid hourly. So I thought if I go through an Umbrella or setup a LTD at least I can claim the expenses back especially mileage as I will be doing 300 miles a week.

[jmo21]

I don't want to sound disrespectful but 21k for an 11 month contract is strictly entry level in this business. You should seriously look at if you should be taken on as a permie, perhaps at a slightly lower rate but with permie benefits. Make sure that you are going to be a genuine self-employed person and that they aren't just taking you for a ride by offering it as a "contract" role so they can wriggle out of their obligations as an employer.

If you are sure you know what you are doing and you are bold and brave enough to work as a self-employed contractor then that's cool, good luck to you! I just don't want to see people get messed about by dodgy employers...

WWS! sounds more like a fixed term contract

~£91 per day?!?! £21,000/11/21 (working days/month)