Sorry if any repetition: But please help a newbie :(

[Daniel2105]

Hi All,

I have been reading about this on this forum but still don't really get it. I have read about the difference between FTC and limited company but what is the difference between FTC and Umbrella company?

So i have been thinking about contracting for a while and now interviewing for a bunch of roles.. My day rate would be £400 a day and one company is happy with Umbrella company (don't have limited yet) and the other wants to employ me on a 6months FTC. That would be an annual salary of over £100K..

Would i not be screwed by tax etc if i would do that? i figure that a permie with a £100+K salary would be taxed more than a contractor on a £400 day rate through an umbrella company??! or am is being dumb now? I mean i am OK with the fact that i won't be able to claim travel as it will only cost me £3,- a day if not less (it's that close to home i could even walk 20min).. But what i don't want is miss out on any after tax net income because of the difference.

The reason i am going the contracting route as well is that i am tired of being a perm employee who has to deal with/is part of company bureaucracy and issues.. As a contractor you are not part of the company and by that don't have to deal with all the crap.. you come, do what you agreed, get paid a lot more and move on...

Should i do FTC as my 1st contract job or demand/suggest to be paid a daily rate via an umbrella company?

Again, sorry if this is already explained a hundred times but it won't be clear to me if the answers are not specific on my personal issue above.

I promise i will remember it for the next time though

[Yonmons]

Hi All,

I have been reading about this on this forum but still don't really get it. I have read about the difference between FTC and limited company but what is the difference between FTC and Umbrella company?

So i have been thinking about contracting for a while and now interviewing for a bunch of roles.. My day rate would be £400 a day and one company is happy with Umbrella company (don't have limited yet) and the other wants to employ me on a 6months FTC. That would be an annual salary of over £100K..

Would i not be screwed by tax etc if i would do that? i figure that a permie with a £100+K salary would be taxed more than a contractor on a £400 day rate through an umbrella company??! or am is being dumb now? I mean i am OK with the fact that i won't be able to claim travel as it will only cost me £3,- a day if not less (it's that close to home i could even walk 20min).. But what i don't want is miss out on any after tax net income because of the difference.

The reason i am going the contracting route as well is that i am tired of being a perm employee who has to deal with/is part of company bureaucracy and issues.. As a contractor you are not part of the company and by that don't have to deal with all the crap.. you come, do what you agreed, get paid a lot more and move on...

Should i do FTC as my 1st contract job or demand/suggest to be paid a daily rate via an umbrella company?

Again, sorry if this is already explained a hundred times but it won't be clear to me if the answers are not specific on my personal issue above.

I promise i will remember it for the next time though

Depends on your personal circumstances, and mine would be on that rate utilise a LTD company. (it does not take long to set up) I have been contracting a long time, and always look at a FTC as "We want to take a contractor on the job, but dont want to pay contractor rates" So come and work for us to get all the benefits, sick pay, holiday pay, pension (maybe) and your there for like 6 months ?

You will be taxed PAYE as a permi employee, and wont be able to claim the benefits a contractor can (At the moment romours abound !)

Just my opinion FWIW

[mudskipper]

I don't know a great deal about how FTCs work - if you're on their payroll, and they are stumping up for employer's NI, holiday pay, sick pay, bank holidays etc, then it sounds like you'll be a lot better off than with an umbrella.

For a 12 month contract at £400 a day, it would be well worth considering going ltd.

[LisaContractorUmbrella]

With a fixed term contract you will become the employee of the client for a fixed period of time; during that time you must not be treated less favourably than permanent members of staff and you will be taxed in the same way as a permanent employee. With a salary of over £100k you will start to lose your tax free allowance (£1 for every £2 you earn over £100k) and the majority of your earnings will be taxed at 40%. You will pay employee's NIC's and your employer will pay employer's NIC's. This is absolutely no different if you chose to work through an umbrella company - the umbrella company will pay the employer's NIC's from the contract rate of £400 per day and they will also retain a margin of around £30 per week. The balance, which is your salary, is taxable through PAYE so you will pay income tax and employee's NIC's as above. This is an illustration based on 20 days worked in a month at £400 per day:

Company Income 8,000.00
Expenses 0.00


Employer's NI 875.90
Employee's NI 412.95
Employee Tax 1,944.58
Total All Tax 3,233.43
CU Margin 105.00
Total Net Income 4,661.72

If you were to start a Limited Company your tax position would, pretty much, remain the same unless you worked outside of IR35 - if you have a look over here ------> under CUK Navigation you will see an link for IR35/S660/BN66 - the IR35 link will tell you everything you need to know. If your working practices do put you outside IR35 your take home pay would be better than if you were employed by an umbrella company.

I think that most people on the forum love the contractor lifestyle - if that's what attracts you, rather than the prospect of big bucks, then go for it. Good luck

[TykeMerc]

Daniel2105 - Sorry if the natives come across as hostile, we see so many repetitions of the same damn silly scenarios and have a major troll infestation too. You've framed a sensible question (ok it's not vastly different from some) with sufficient detail up front.

Your scenario is different in one major respect - for a Fixed Term Contract, instead of the usual pitiful rates they're willing to offer 100k ish which is more than £400 per day (most of us tend to assume 200-220 workable days in a year, 100k @ 400 is 250 days) and quite honestly in your boots I'd probably tear their arm off at that offer.
Lisa has posted an illustration of what a proper Umbrella payroll would look like, I assume you're wise to the 90% takehome crowd, others have posted that at £400 a day then a MyCo Ltd is perfectly viable, which is absolutely true and normally what we'd all recommend.

All that being said with what's effectively a rate increase at £100k the FTC looks extremely attractive, paid holidays, paid bank holidays, employer carries the Employers NI cost (in an Umbrella it has to be funded by your day rate), paid if off sick, pension contributions, benefits in line with their other employees.

If it's purely a financial decision, which is perfectly reasonable, then I'd suggest you Google up some salary calculators, use Lisa's figures and consider that if you're aiming for tax efficiency just how much you should draw down from a MyCo Ltd and run a comparison. You are slightly comparing apples (Umbrella or MyCo) with pears with this FTC offer.

I find myself in a unique situation, in your case I'd seriously consider the FTC.

[northernladuk]

Hi All,

I have been reading about this on this forum but still don't really get it. I have read about the difference between FTC and limited company but what is the difference between FTC and Umbrella company?

This should answer your question. With an FTC you are an employee of your client with the benefits due a full timer.

https://www.gov.uk/fixed-term-contracts

All though you are employed through a brolly you go find your own work with different clients.

Two very different beasts so shouldn't be hard to understand the difference.

So i have been thinking about contracting for a while and now interviewing for a bunch of roles.. My day rate would be £400 a day and one company is happy with Umbrella company (don't have limited yet) and the other wants to employ me on a 6months FTC. That would be an annual salary of over £100K..

This doesn't read right to me and appears to be based on assumptions. I could be wrong but when you say 'That would be a salary of £100k.' Are you guessing here using the £400 rate or is that what you have been offered. I wouldn't make any assumptions around this and make sure it's written down. If you are assuming this will be the salary I have a feeling you are going to be very disappointed. If that's what they have offered then fair enough. Don't try and make the two look equal because they are not.

Would i not be screwed by tax etc if i would do that? i figure that a permie with a £100+K salary would be taxed more than a contractor on a £400 day rate through an umbrella company??! or am is being dumb now? I mean i am OK with the fact that i won't be able to claim travel as it will only cost me £3,- a day if not less (it's that close to home i could even walk 20min).. But what i don't want is miss out on any after tax net income because of the difference.

Confirm the numbers as I suggested before you spend too long worrying about it. Get the facts and then start to make decisions.

The reason i am going the contracting route as well is that i am tired of being a perm employee who has to deal with/is part of company bureaucracy and issues.. As a contractor you are not part of the company and by that don't have to deal with all the crap.. you come, do what you agreed, get paid a lot more and move on...

I wouldn't be so sure about that... and don't forget the gigs you are brought on just to be the scapegoat and the ones they are looking for someone to blame for everything... It's not as black and white as you think.

Should i do FTC as my 1st contract job or demand/suggest to be paid a daily rate via an umbrella company?

Again, sorry if this is already explained a hundred times but it won't be clear to me if the answers are not specific on my personal issue above.

I promise i will remember it for the next time though

Doesn't really matter, you are an employee either way around. With one you are an employee of the company and should get the benefits and protection offered to permies, the other you are an employee of a middle man. Get the facts of the matter and then start to do some comparisons.

[BolshieBastard]

I think the OP is getting confused here or making some outlandish assumptions.

So i have been thinking about contracting for a while and now interviewing for a bunch of roles.. My day rate would be £400 a day and one company is happy with Umbrella company (don't have limited yet) and the other wants to employ me on a 6months FTC. That would be an annual salary of over £100K..

For someone who doesnt know what an FTC is or how it works, he's saying his rate is £400 a day. That may be what the OP wants and he may have agreed with an umbrella to work through but there seems to be an assumption he's going to get £400 a day working on an FTC.

Is the OP sure the company offering the FTC is going to pay 400 a day because everything I know is that FTC's pay a hell of a lot lower than this.

It must be some permie job that's going to pay 100k for an FTC. Could happen but Im doubtful.

Just a word of caution otherwise we might be seeing a future post 'I thought I was being paid 400 a day for an FTC but find Im only getting 200 before tax' etc.

[jmo21]

typically, a FTC does not belong in the conversation as the type of contracts that people here typically engage in.

It is usually a normal permie salary, for a fixed amount of time.

As others have said, I'd be surprised if it is paying £100k unless it is some kind of short term "very high up" manager/director type role.

[Daniel2105]

Thanks everyone! that really helped me.

i just wanted to have more info and understand the options before i go into negotiating and making my choice between the 2. If all the perm benefits are included in the FTC than it is a good deal indeed even though it is not really contracting... the offer now is not far from £100K so i might as well push for it. According to my salary calculator app £400 gross a day equals an annual salary of £104.000 gross.

What i meant with my explanation of why contracting for me is that if i don't like the company i don't have to stay there for longer than 6 months if i don't want to.. i finish the contract and off i go to the next adventure.. it's that freedom of not being an employee and free to go as you please, accept as you please, create diversity in your career by choosing which project to pursue etc. .. When a permie quits every job after 6 months because he is bored of the same company and content all the time.. he/she kind of has a problem getting a new job as no one wants to employ a job hopper... sorry if i did not explain it right but that's what i meant.

I will definitely look into setting up my own limited company as well for the long term.

[Daniel2105]

I think the OP is getting confused here or making some outlandish assumptions.



For someone who doesnt know what an FTC is or how it works, he's saying his rate is £400 a day. That may be what the OP wants and he may have agreed with an umbrella to work through but there seems to be an assumption he's going to get £400 a day working on an FTC.

Is the OP sure the company offering the FTC is going to pay 400 a day because everything I know is that FTC's pay a hell of a lot lower than this.

It must be some permie job that's going to pay 100k for an FTC. Could happen but Im doubtful.

Just a word of caution otherwise we might be seeing a future post 'I thought I was being paid 400 a day for an FTC but find Im only getting 200 before tax' etc.

I did not say that i don't know what an FTC is, i wanted clarification on umbrella vs FTC as i don't know much about umbrella and LTd. I also don't assume i am going to get paid £400 a day, it is the rate we agreed before they introduced the FTC option for which the salary is not far from the equivalent of £400 a day which would be £104K per annum.

I agree with you that most perm or FTC do pay substantially less than that which is why i was a bit sceptical on how such a high salary on FTC would work out after tax VS umbrella which was my question..

Thanks for your contribution though..