Are you more likely to get a mortgage if you're umbrella, LTD or PAYE?

[trumpet]

I've been contracting a year now - I was on a one year contract and paid through an umbrella company. Prior to that I was not working due to illness.

I'm starting my next role shortly which is another 1 year contract. The employer has given me the option of being paid on a PAYE basis or on a day rate so I've got three options: remain with the umbrella, start an LTD or go PAYE.

I'm hoping to get a mortgage in the next 12 months.

- What's the likelihood of getting a mortgage if I go day rate and set up as an LTD?
- Would it be better for me to remain with the umbrella company as an 'employee'?
- Would it be better for me to be a proper employee on PAYE?


Any tips or advice much appreciated.

[northernladuk]

Some one hasn't bothered doing their research have they....

Read this thread and then you will find answers to all your questions and more...

http://forums.contractoruk.com/welco...uk-forums.html

Another thread on a topic that is covered in the thread right below it as usual as well....

[Power Mortgages Ltd]

I've been contracting a year now - I was on a one year contract and paid through an umbrella company. Prior to that I was not working due to illness.

I'm starting my next role shortly which is another 1 year contract. The employer has given me the option of being paid on a PAYE basis or on a day rate so I've got three options: remain with the umbrella, start an LTD or go PAYE.

I'm hoping to get a mortgage in the next 12 months.

- What's the likelihood of getting a mortgage if I go day rate and set up as an LTD?
- Would it be better for me to remain with the umbrella company as an 'employee'?
- Would it be better for me to be a proper employee on PAYE?


Any tips or advice much appreciated.

Hi Trumpet,

To answer your questions:

- You will be able to get a mortgage if you set up as a Ltd Co, you wont need any years accounts as you have been contracting previously for 1 year
- It would not really matter if you remained with the Umbrella Company as an employee but depends on how you are remunerated by the Umbrella Company. If you find a lot of your pay is made up of bonuses, commission, expenses, holiday pay or overtime then most lenders wont use all of this income as they wont class it as guaranteed. This is where using the day rate on your contract may help as the Umbrella Company is pretty much ignored
- Being a proper employee on PAYE may give you a couple more options yes but the difference in rate you would get on a fixed term contract against a day rate contract is not that significant and you may find that being a day rate contractor and the tax advatntages you would get from that would actually outweight the slight increase in the cost of the mortgage on a day rate.

Ben

[Maslins]

If getting a mortgage in <12 months is your main priority, then go PAYE.

[northernladuk]

I'm starting my next role shortly which is another 1 year contract. The employer has given me the option of being paid on a PAYE basis or on a day rate so I've got three options: remain with the umbrella, start an LTD or go PAYE.

I would say you have other more pressing problems to attend to. As a contractor your client is NOT your employer so it appears you are putting yourself inside IR35. Adding to that is the option of day rate or PAYE... Sounds like the true definition of a disguised permie so even if the client offers you a day rate you are going to have to pay it all to yourself as PAYE anyway. In your situation you cannot go low salary high divis rate as you are a prime candidate to fail an IR35 test.

LTD is not really an option for you. There are some savings running a LTD inside IR35 but not much I believe.

[TheFaQQer]

The employer has given me the option of being paid on a PAYE basis or on a day rate so I've got three options: remain with the umbrella, start an LTD or go PAYE.

If they are your employer, then you only have one option - PAYE.

If they are your client, then you have two options - umbrella or Ltd.

Given that neither you nor your employer have grasped this fundamental difference, I would say PAYE is your only sensible option.

[trumpet]

I would say you have other more pressing problems to attend to. As a contractor your client is NOT your employer so it appears you are putting yourself inside IR35...

I will continue to get freelance work in addition to working with this client. Doesn't that put me outside IR35?

[northernladuk]

I will continue to get freelance work in addition to working with this client. Doesn't that put me outside IR35?

Absolutely not. It is on a contract by contract basis.

You 'may' avoid detection due to the business tests but in this case you are clearly a disguised employee.

You did get your contract checked by a specialist didn't you?

[trumpet]

Absolutely not. It is on a contract by contract basis.

You 'may' avoid detection due to the business tests but in this case you are clearly a disguised employee.

You did get your contract checked by a specialist didn't you?

No, what specialist am I supposed to talk to? I haven't as far as I am aware been in IR35 for the past year and didn't have my contract checked with anyone.

[Clare@InTouch]

No, what specialist am I supposed to talk to? I haven't as far as I am aware been in IR35 for the past year and didn't have my contract checked with anyone.

Check out someone like Qdos or Bauer & Cotterill, they can review the contract and the working conditions for you, and offer advice on how to stay outside of IR35 (if possible).

Just to echo the advice above too - having multiple contracts does not mean you're outside of IR35. Each engagement is looked at on an individual basis, and it's the theoretical contract between you and the end client in each case that matters.