Short term contracting

[bgog]

Hi

I've just been offered 3/4 months of IT contract work. There is no possibility of contracting after this, as I have a full time role lined up in 6 months time. I would be paid around £5000 per month.

My understanding is that all I need to do is self-assess with the IR for a short term contract like this, and I don't need to go through the whole process of registering a new company for VAT etc. Is this correct?

Is there anything else I've missed? Any advice gratefully received, this is all new to me.

Thanks

[northernladuk]

Is it through an agent or direct. You cannot be self employed through an agency and I very much doubt a client would take you on on the same basis. Not all won't but wouldn't be surprised if they said no.

You need to go through an Umbrella who become your employer for the term of the assignment or you start a LTD.

There is a thread running with exactly this question running in the Accounting/Legal section. Look for the thread titled 'Post MVL Options'. He is shutting his company but one last contract has come up and is asking exactly the same as you and it's covered well in there.

[mudskipper]

Some clients are happy with this - if you're direct and the client is OK with it, self employed is the way to go. Otherwise, as NLUK said, umbrella is the most straightforward option.

Edit: if self-employed is an option, you need to tell HMRC that you are now self employed.

[bgog]

Thanks for the replies. My main issue with the umbrella option is they will charge 20%, which seems to be a hefty chunk for not doing very much.

I'll check with the company and see if they're happy with me simply going self employed for 3 months.

[DirtyDog]

Thanks for the replies. My main issue with the umbrella option is they will charge 20%, which seems to be a hefty chunk for not doing very much.

I'll check with the company and see if they're happy with me simply going self employed for 3 months.

I've just plugged £5000 a month into the calculator at Contractor Umbrella, and it puts their margin at £95, so just a shade under 2%. Which given everything they do seems to be a tiny bit for doing a fair amount.

The rest of the money goes to the tax man, which you can't do much about in your position.

[bgog]

I've just plugged £5000 a month into the calculator at Contractor Umbrella, and it puts their margin at £95, so just a shade under 2%. Which given everything they do seems to be a tiny bit for doing a fair amount.

The rest of the money goes to the tax man, which you can't do much about in your position.

Why only 2%? The 20% is to the agency. Income tax is completely separate to that. Where is the other 18% going? (sorry I'm running to catch up with all this)

[bgog]

Why only 2%? The 20% is to the agency. Income tax is completely separate to that. Where is the other 18% going? (sorry I'm running to catch up with all this)

What I'm getting at is, I have the contract work lined up, I don't need more contract work afterwords, so what am I paying 20% for? If the umbrella company is charging £95 where is the rest going?

[DirtyDog]

Why only 2%? The 20% is to the agency. Income tax is completely separate to that. Where is the other 18% going? (sorry I'm running to catch up with all this)

If you invoice £5000 a month via an umbrella, with no expenses, the umbrella will deduct:

• Employer's NI - £516.47
• Employee's NI - £355.57
• Employee Tax - £905.64
• Umbrella margin - £95.00

What the agency adds as a margin between what you / the umbrella invoice them and what they invoice the client doesn't come into it.

[DirtyDog]

What I'm getting at is, I have the contract work lined up, I don't need more contract work afterwords, so what am I paying 20% for? If the umbrella company is charging £95 where is the rest going?

Who are you paying 20% to?

[kal]

See if they will just pay you cash in hand