limited company formation for 6 months to 1 year use !

**Clare@InTouch** · 21 October 2011, 15:48

Starting a company for a short period can still be tax efficient, it all depends on your level of income. If you'll be invoicing around £30,000 then it's worth thinking about, anything less and you may want to consider Umbrella options (the costs of opening, running and closing the company can outweigh the tax savings otherwise). Call a few accountants and get income comparisons done, that way you can see exactly what you stand to gain, and then decide whether it's worth it given the small amount of extra admin involved.

Closing the company can be a long winded process, but it can be carried out even after you've left the UK as your accountant can prepare the necessary forms for you to sign before you go, then just submit them as and when required. With email communication there's no reason it can't be done easily enough.

**sathiyamoorthy** · 21 October 2011, 16:56

Hi Clare,

Thanks for your reply ! But am concerned about the 30,000 pounds. Am sure the contract, and work practices are going to take care that it does not fall inside IR 35.

I will be saving Employers NI, a little amount from tax. I guess only less than 50% of this I will spend for forming, maintaining ( accounts ) & closing company. Let me write it out ! to find min.

Going for a limited company even for 15000 pound invoicing is also worth, Kindly clarify me if something is wrong !
( all these calc are for finding out minimum savings ! I believe i will find out next contract job also for another couple of months before closing the company - is a different part .. )
To understand the case of 15K is minimum,

230 GBP per day,
For a month earning ( 230 * 22 ): 5060
Limited company take home per month ( as per sdj calculator ): 4050
Umbrella company take home per month ( calculator ) : 3127

So I lose 923 per month which is 2769 in umbrella company for 3 months in 15K invoicing.

I am thinking I will not be spending more than the following for company formation to closing,

Formation 150+
Accountancy charge: 130+ per month ( 400 for 3 month )
Closure 200
Other miscellaneous - 250

In total I spend 1000 only ! Am I missing any other expense ?

So finally approximately - even in worst case, am gaining 1769 pounds ( which is almost my another 15 days earning ) by limited company for 15K pounds invoicing - of 3 months.

Sorry, am new to contracting & this forum ! So if something is not ok -- let me change from next time by pointing it out ... But I believe I am doing all these after spending sometime in reading resources available. Thanks for the time.

**Clare@InTouch** · 24 October 2011, 11:54

The limited company figures of £5,060 with a take home of £4,050 assume no expenses, and that you're able to take that whole £4,050 with no personal tax implications. If you've had no other earnings in the current tax year then this may be correct, but if you've had other income from employment etc. then you may well pay some personal tax too. Once that's factored into the calculations, you may not be better off after all.

In order to get a full picture I'd suggest talking it through with an accountant, they will need to consider other income and potentially your residency status before being able to offer full advice.

The accountancy charges you include below are quite high, you can get a full monthly service for less than £130 a month, along with incorporation for less. Again, shop around and talk to a few accountants before making a decision.

limited company formation for 6 months to 1 year use !