Since I only expect to be working an average of one or two days a month, I've decided to wind up my company and use an umbrella.
Parasol's monthly charge is not very different to what my accountant charges to run the company, but the advantage is that I don't have to pay for months I don't work. Also, with the company, the "5%" allowed under IR35 is not enough to pay the accountant. Further, after interrogating their customer service, I possibly wrongly concluded that I would only be paying their weekly charge of £27.50 for weeks I worked, which would quarter my accountancy overheads.
However I overlooked that as an umbrella employee, I will no longer have an annual earnings period for NI purposes. As a company director I paid no NI until I've earned well over £5000 in a year. As a weekly paid employee I would pay aprox. 24% NI on anything over £110 earned in any given week. Alternatively, as a monthly paid employee I would pay the same rate on anything over £467 earned in any given month. Essentially, the NI system is designed on the premise that your earn more or less the same each week/month, so people like me who don't, who have an irregular pattern of work, pay much more NI for a given amount of annual earnings.
Let's assume that for both NI and Parasol charging purposes, I'm treated as either weekly or monthly paid. Then, if I work more than 1 day in the month, my take-home is actually always higher if I'm treated as monthly paid. The extra NI from being treated as weekly paid always more than offsets the lower Parasol fee from only paying for weeks in which I actually worked.
Parasol originally implied I would only pay £27.50 for each week containing days I actually worked, or the monthly fee if I worked in all weeks. I'm doubtful that this will turn out to be true, if I'm monthly-paid for NI purposes.
Parasol's monthly charge is not very different to what my accountant charges to run the company, but the advantage is that I don't have to pay for months I don't work. Also, with the company, the "5%" allowed under IR35 is not enough to pay the accountant. Further, after interrogating their customer service, I possibly wrongly concluded that I would only be paying their weekly charge of £27.50 for weeks I worked, which would quarter my accountancy overheads.
However I overlooked that as an umbrella employee, I will no longer have an annual earnings period for NI purposes. As a company director I paid no NI until I've earned well over £5000 in a year. As a weekly paid employee I would pay aprox. 24% NI on anything over £110 earned in any given week. Alternatively, as a monthly paid employee I would pay the same rate on anything over £467 earned in any given month. Essentially, the NI system is designed on the premise that your earn more or less the same each week/month, so people like me who don't, who have an irregular pattern of work, pay much more NI for a given amount of annual earnings.
Let's assume that for both NI and Parasol charging purposes, I'm treated as either weekly or monthly paid. Then, if I work more than 1 day in the month, my take-home is actually always higher if I'm treated as monthly paid. The extra NI from being treated as weekly paid always more than offsets the lower Parasol fee from only paying for weeks in which I actually worked.
Parasol originally implied I would only pay £27.50 for each week containing days I actually worked, or the monthly fee if I worked in all weeks. I'm doubtful that this will turn out to be true, if I'm monthly-paid for NI purposes.
Comment