Part time, minimal contracting - which way to go?

[lewiskei]

Hi Folks,

I took early retirement at the end of January this year and my ex-employers now want me to go back on an ad-hoc contract basis. This would be on an "as and when required" basis for specific projects and would be for 10 - 12 hours per week for 6 - 8 weeks for each project. The frequency will be one or two contracts per year. I am finding it very difficult to decide the best approach for this scenario i.e. should I go limited company or umbrella. I am already receiving pension payments which put me over the tax allowance so I will pay tax on anything I earn.
Any advice would be greatly appreciated as I am finding it a bit of a minefield

Thanks in advance

Keith

[Clare@InTouch]

If you go limited then any income will be taxed at 20%, but nothing further if you leave it in the company. This could be better than the tax you'd pay through umbrella as you'd pay tax and NI. That being said, the running costs of a limited company may outweigh the tax benefits, depending on how much you intend to earn - in theory you need around £30k per year to make it worthwhile.

[kal]

Hi Folks,

I took early retirement at the end of January this year and my ex-employers now want me to go back on an ad-hoc contract basis. This would be on an "as and when required" basis for specific projects and would be for 10 - 12 hours per week for 6 - 8 weeks for each project. The frequency will be one or two contracts per year. I am finding it very difficult to decide the best approach for this scenario i.e. should I go limited company or umbrella. I am already receiving pension payments which put me over the tax allowance so I will pay tax on anything I earn.
Any advice would be greatly appreciated as I am finding it a bit of a minefield

Thanks in advance

Keith

Will they take you on as a sole trader?

[TheFaQQer]

Will they take you on as a sole trader?

That would be my push if you can get it.

[d000hg]

I am already receiving pension payments which put me over the tax allowance so I will pay tax on anything I earn.

Will they take you on as a sole trader?

This would be the obvious answer if he didn't have other income sources. It rather depends how much his pension is and how much he expects to bring in contracting - paying standard rate tax is fine but if you're going to end up with a significant proportion of your earnings in the higher tax bracket, perhaps not.
If he has other income e.g. rental property or something, even more so.

However 10 hours a week for 15 weeks a year sounds like perfect sole trader territory to me.

[speling bee]

Can you pay into a pension fund if already retired? Would there be any benefit to creating another pension pot / SIPP, that could be drawn down at some point in the future under the new rules?

[lewiskei]

Thanks for all your replies. I will not be earning anywhere near £30k. It will be around £5k - 6k per contract and I will be doing 1 or 2 per year. This is really just to keep my hand in and earn a bit of extra beer money as I do not actually need to do it to be able to live. They will not accept me as a sole trader. My current pension payments take me over the tax allowance so everything will be taxed and I need to be careful not to earn too much and go into the 40% tax bracket. I agree that paying into another pension fund would be tax efficient but that would then "rob" me of the extra beer money I would be earning (if you see what I mean)
It sounds like I would be better with an umbrella company. Does anyone have any recommendations of any which you have used?

Cheers

Keith

[d000hg]

They will not accept me as a sole trader.

Have they said why not? Have you pushed them on it? It might be policy not to hire contractors this way but retaining someone who they know and trust is a bit different. I'd be inclined to push back and tell them it's not really worth your while setting up a company for £10k work a year, in case it's just a HR person sticking their nose in!

Could you not also stay/restart as employed on a zero-hours contract or something, or pro-rata on 1 day a month?

[Mehmeh]

Thanks for all your replies. I will not be earning anywhere near £30k. It will be around £5k - 6k per contract and I will be doing 1 or 2 per year. This is really just to keep my hand in and earn a bit of extra beer money as I do not actually need to do it to be able to live. They will not accept me as a sole trader. My current pension payments take me over the tax allowance so everything will be taxed and I need to be careful not to earn too much and go into the 40% tax bracket. I agree that paying into another pension fund would be tax efficient but that would then "rob" me of the extra beer money I would be earning (if you see what I mean)
It sounds like I would be better with an umbrella company. Does anyone have any recommendations of any which you have used?

Cheers

Keith

Can't you pay all of it into a pension and then straight away remove the 25% tax free? Seems like a good deal to me.

Have you already taken 25% out of your existing pension?

[TheFaQQer]

It sounds like I would be better with an umbrella company. Does anyone have any recommendations of any which you have used?

Many will want / need you to be doing more / longer contracts with them to meet their criteria - make sure you give them some details about your exact situation when you are talking to them.

I've never used an umbrella service, but if I did, it would be PAYE Umbrella Companies for UK Contractors | Contractor Umbrella Company - give LIsa a ring and see whether they can help you out.