Contract Advice - Self Employed or Limited Company?

[deeniguy]

Im a network engineer and have never done contract work before. I was made redundant by my employer 2 months ago after 5 years of full service. They now want to recruit me as a contractor for 6 months @ 200GBP/Day. I have looked around and asked what should be my way to go about the finance. So i was told to avoid umbrella since im staying more than 3 months and my salary will be above 25k, so its more tax efficient to setup a LTD Company. I've been looking into it and had my mind set, but my old manager has advised its not required as he recommended to stay as a Self-Employed contractor. I would like to get your advice as it seems there's less hassle with being self employed, but i don't mind looking for an accountant and doing invoices for a few minutes a week, if i am able to get a higher take-home with the LTD company option. Any advice will be much appreciated.

[malvolio]

A slight reality check here. At £200 a day to you your ex-employer is doing you no favours: in fact he;s rather taking the p!ss. What's he's done is keep his costs the same while removing all your employment rights and saving himself 13.8% Employers NICs which you are now going to pay for him, as well as not having to pay you for holidays, sick pay, pensions and training and being able to dump you on no notice at all. Also, if he's taking you back in the same role, you can't possibly be redundant and any redundancy pay you did get is liable to tax at the higher rate.

So perhaps this isn't the best idea in the world and you may be better off selling your skills on the open market.

But to answer your question, if you feel you have to take the offer, the job will be IR35 caught, so go umbrella; you won't get much more via a limited and you don't need the hassle. Meanwhile get reading the guides and work out what to do next.

[LisaContractorUmbrella]

If the OP is going direct with his old employer there isn't any reason why he couldn't go sole trader route is there?

[FarmerPalmer]

If the OP is going direct with his old employer there isn't any reason why he couldn't go sole trader route is there?

... And if self-employed and deemed to be an employee by HMRC then it's the employer who gets hit more so than than the deemed employee.

[Martin at NixonWilliams]

Im a network engineer and have never done contract work before. I was made redundant by my employer 2 months ago after 5 years of full service. They now want to recruit me as a contractor for 6 months @ 200GBP/Day. I have looked around and asked what should be my way to go about the finance. So i was told to avoid umbrella since im staying more than 3 months and my salary will be above 25k, so its more tax efficient to setup a LTD Company. I've been looking into it and had my mind set, but my old manager has advised its not required as he recommended to stay as a Self-Employed contractor. I would like to get your advice as it seems there's less hassle with being self employed, but i don't mind looking for an accountant and doing invoices for a few minutes a week, if i am able to get a higher take-home with the LTD company option. Any advice will be much appreciated.

A limited company will give you a higher take home pay. However, as you will almost certainly be caught by IR35 the additional take home pay will not be much higher than if you were self-employed. If you would prefer not to have the administrative burden of running a company, self-employment might be the better option for this particular contract.

If you get another contract in the future that is outside IR35, operating via a limited company will be much more worth your while financially.

[LisaContractorUmbrella]

... And if self-employed and deemed to be an employee by HMRC then it's the employer who gets hit more so than than the deemed employee.

Agreed but if the client are prepared to take this risk and there's no agency involved it would be the best option financially for the OP

[Wanderer]

They now want to recruit me as a contractor for 6 months @ 200GBP/Day

What was your permie salary? Unless it was ~£25k/year they are underpaying you for the contract role.

[eek]

What was your permie salary? Unless it was ~£25k/year they are underpaying you for the contract role.

WWS the basic rule for contracting salary/ 1000 = hourly rate.

and I really wouldn't go back to a previous employer but that may be just me.

[Boo]

... And if self-employed and deemed to be an employee by HMRC then it's the employer who gets hit more so than than the deemed employee.

Good point, there being no intermediary in the case of self-employment.

Boo2

[Boo]

WWS the basic rule for contracting salary/ 1000 = hourly rate.

There's no ******* way I'd work for that.

and I really wouldn't go back to a previous employer but that may be just me.

I'd have no issues and in fact the first gig I was going to take after starting as a contractor was my previous employer. I see no issues with it at all providing the boxes are all ticked.

Boo2