LTD and benefits?

[LisaContractorUmbrella]

That is not quite true!

Even if you are caught by IR35 you would be better off with a limited company, reasons being:

• Contractor can still claim the same expenses as with a brolly
• Available expenses are wider, eg mobile phone, laptop etc
• Flat Rate VAT saving - this can be a considerable saving
• 5% allowance not subject to PAYE/NIC
• Brolly fees can be quite high, some charge a percentage of income, rather than a fixed fee

Brolly's usually charge per week or per month, but do not seem to explain why the processing charge should be more if it is done monthly.

Cannot see why the cost would be more - the charge should be per payment, and if the contractor chooses a monthly cycle they should benefit from this.

Another factor is that the brolly will reclaim the VAT on the contractors mileage but I have yet to see this being passed onto the contractor!

Expenses that can be claimed are the same - what an umbrella company contractor will not be able to do is to purchase assets for the company.
Flat rate scheme benefit is temporary
5% allowance has to be retained within the company
The payment cycle is usually determined by the agency and not the contractor
Not all umbrella companies' monthly charge is multiples of their weekly charge

In all fairness, there are benefits to a Ltd Co and benefits to working with a brolly - it just really depends what comes highest on your list of priorities I suppose

[trumpet]

WTF!?

Just say 'NO!' to brollies!

Curious. How much do you think I would be taking home under LTD?

I Gross £1150 per week with deductions for PAYE tax (typically around £190), Employees NI (£83), Student Loan (£58), Employers NI (£112), Brolly margin (£27), holiday pay (£23).

I wouldn't have the last two/three so would be £50/£162 better off a week?

[LisaContractorUmbrella]

Curious. How much do you think I would be taking home under LTD?

I Gross £1150 per week with deductions for PAYE tax (typically around £190), Employees NI (£83), Student Loan (£58), Employers NI (£112), Brolly margin (£27), holiday pay (£23).

I wouldn't have the last two/three so would be £50/£162 better off a week?

You wouldn't have the umbrella co margin but you would have accountancy fees

[stek]

LTD and benefits?

You wouldn't have the umbrella co margin but you would have accountancy fees

Edit, didn't read!

[LisaContractorUmbrella]

Edit, didn't read!

You were too quick for me Stek Eer's still payable if inside IR35

[northernladuk]

There is also the peace of mind element. We have a number of threads floating about where peoples incompetence and lack of understanding have put them in so very serious situations. Somewhere they wouldn't be if they were with an Umbrella so it's not just financial considerations to think about when deciding.

[Jeremiah@RHJAccountants]

You wouldn't have the umbrella co margin but you would have accountancy fees

Which are Tax deductable so for example if accountancy fees were £1,000 this would mean 20% off this £200 would come off your corporation tax bill.

[Jeremiah@RHJAccountants]

Curious. How much do you think I would be taking home under LTD?

I Gross £1150 per week with deductions for PAYE tax (typically around £190), Employees NI (£83), Student Loan (£58), Employers NI (£112), Brolly margin (£27), holiday pay (£23).

I wouldn't have the last two/three so would be £50/£162 better off a week?

Why not speak to a few accountants and see if they can do a take home calculation of what you make through a LTD vs Umbrella?

I do this for my new clients and exisiting ones when ever they ask then at least you can see the figures and see what is best for you if having more take home pay is a big motivation

[Nixon Williams]

Expenses that can be claimed are the same - what an umbrella company contractor will not be able to do is to purchase assets for the company.

Not always the same, I am not aware of a brolly that will pay for a contractor's mobile phone bill as an example.

Flat rate scheme benefit is temporary

The 1% discount in the first year is temporary, but the regular scheme certainly is not, it is an ongoing saving for contractors.

5% allowance has to be retained within the company

No it doesn't - it can be paid as a dividend, it is likely to be very small but it does not have to be retained in the company.

The payment cycle is usually determined by the agency and not the contractor

I understand that, but why do some brollies charge more to process a payment if it is monthly rather than weekly. If a brolly can process a payment for say £25, why charge £100 if it is done monthly? The work is exactly the same?

Not all umbrella companies' monthly charge is multiples of their weekly charge

Good, although why charge £27.50 to process a weekly payment and £95 to process one monthly? I cannot see that your costs are any greater because the payment is done once a month rather than once a week?

I agree that in some limited cases, an umbrella can be a viable option, but in most cases, trading through a limited company is more efficient.

[LisaContractorUmbrella]

There is also the peace of mind element. We have a number of threads floating about where peoples incompetence and lack of understanding have put them in so very serious situations. Somewhere they wouldn't be if they were with an Umbrella so it's not just financial considerations to think about when deciding.

Well put NLUK I know that some people on here think we are the spawn of the devil (yes, you BB) but umbrella companies can be a very useful stepping stone for people between permiedom and running a Ltd Co.