Quick bit of advice - what %age of each invoice to set aside???

[NC35]

Hi All

Just starting out, not a contractor but supplying IT services for quite a few companies. So not VAT registered, doubt I will get to the registration threshold. Sole trader at the moment, thinking of going limited. Need an accountant who I can approach "face to face" in Leeds to discuss these issues etc. (see other post).

Back to the question. Being prudent what is a good rule of thumb to put aside from each paid invoice to cover TAX etc. My bank opened a "savings" account for this purpose.

Seen other posts for 21% of each invoice before VAT, is this about right assuming my ongoing expenses will reduce my liability?

Think I need the advice of on accountant sooner than later

Cheers

[Old Greg]

Hi All

Just starting out, not a contractor but supplying IT services for quite a few companies. So not VAT registered, doubt I will get to the registration threshold. Sole trader at the moment, thinking of going limited. Need an accountant who I can approach "face to face" in Leeds to discuss these issues etc. (see other post).

Back to the question. Being prudent what is a good rule of thumb to put aside from each paid invoice to cover TAX etc. My bank opened a "savings" account for this purpose.

Seen other posts for 21% of each invoice before VAT, is this about right assuming my ongoing expenses will reduce my liability?

Think I need the advice of on accountant sooner than later

Cheers

You do need an accountant! Have a look at this guide: SJD Contractors Guide - Step by Step Guide - Expenses Guide - Take Home Pay Calculator . You need to register free to download.

There are benefits and potential drawbacks to VAT registration even if below threshold - need an accountant! Can't comment on 21% except that it seems low to me (you need an accountant!)

[TheFaQQer]

If you aren't operating through an umbrella or your own Ltd, then everything you bring in will be subject to PAYE rates.

So, it depends on what your current income is and how much you are going to earn. (I think!)

You need an accountant and I would either go through an umbrella or get your own company sorted sooner rather than later - then you can start operating as a business rather than running the risk of mixing your own money and that of the company.

Also, if you aren't through an Ltd or umbrella, agencies in the UK won't touch you.

[Wanderer]

Seen other posts for 21% of each invoice before VAT, is this about right assuming my ongoing expenses will reduce my liability

21% is about right for a LTD, but sole trader will pay a lot more. Set up a LTD is my advice - it's more admin but you can potentially avoid more tax and you also have limited liability (ie, they can't come after your personal assets, only the company's)

Definitely speak to an accountant who can advise you on your personal circumstances.

[Ignis Fatuus]

21% is about right for a LTD, but sole trader will pay a lot more. Set up a LTD is my advice - it's more admin but you can potentially avoid more tax and you also have limited liability (ie, they can't come after your personal assets, only the company's)

They? Who is They? If it's the Revenue, I bet They can.

[SueEllen]

21% is about right for a LTD, but sole trader will pay a lot more. Set up a LTD is my advice - it's more admin but you can potentially avoid more tax and you also have limited liability (ie, they can't come after your personal assets, only the company's).

As IF said if "they" = HMRC they can come after your personal assets or make you bankrupt in the process of dragging you through legal action as they don't owe a duty of care to people.

[Wanderer]

They? Who is They? If it's the Revenue, I bet They can.

Absolutely. A Limited Company isn't a vehicle to rob the HMRC blind, they will definitely come after your personal assets if you engage in wrongful trading as a company director. Sorry if that wasn't clear.

My point about Limited Liability refers to the "quite a few companies" that NC35 works for. Any one of these could bankrupt a worker acting as a sole trader if things went pear shaped. Under a Limited Company structure they would probably get bugger all as you could close the company and there would most likely be nothing for them to take.