Contracting within IR35

[sal]

If you are just starting and your first contract is inside IR35 (regardless of the reasons). It makes zero sense to go for limited company. Umbrella fees are generally lower or on par with accountancy fees and you are hassle free.

The calculator bellow can give you the numbers for both their umbrella offering and ltd outside IR35

https://www.contractorumbrella.com/r...ye-calculator/

[Old Greg]

So I've read a number of articles, posts from this forum and used the "IR35 calculator" which unfortunately doesn't provide any breakdown.

My situation is this: I am currently permanent employee in a private company in London for the last 5 years. I would like to switch to contracting in the same company for a few months and then move on. I understand that in such case I fall well within IR35. My question is - who pays what exactly and what can I pocket in the end?

For the sake of simplicity I've entered £500 daily rate- It says my net monthly income is £5000. Assuming 20 working days a month, this means that 50% of the total amount goes to taxes. That's a lot. So the calculator also says that the same outside IR35 would increase my net income by 20%. How does this work? Does the company I work for takes 20% cut, transfers me the rest of the money and then I pay a bunch of other taxes? What would those be in case like this? Thanks in advance, I am new at this.

Employers NIC is what sometimes surprises people when they look at the calculation.

Why do you think you are Inside IR35? Just because you are contracting with your ex employer does not necessarily make you Inside IR35. It does make it tougher to be demonstrably outside IR35 but it's perfectly possible, particularly if you are working on defined deliverables, rather than just 'a body'.

[northernladuk]

Why do you want to do this? Is your employer onboard with this or is it just something you want?

[doconline]

So I've read a number of articles, posts from this forum and used the "IR35 calculator" which unfortunately doesn't provide any breakdown.

My situation is this: I am currently permanent employee in a private company in London for the last 5 years. I would like to switch to contracting in the same company for a few months and then move on. I understand that in such case I fall well within IR35. My question is - who pays what exactly and what can I pocket in the end?

It says my net monthly income is £5000. Assuming 20 working days a month, this means that 50% of the total amount goes to taxes. That's a lot. So the calculator also says that the same outside IR35 would increase my net income by 20%. How does this work? Does the company I work for takes 20% cut, transfers me the rest of the money and then I pay a bunch of other taxes? What would those be in case like this? Thanks in advance, I am new at this.

I think the really simple answer here is you pay for everything. The main costs to you being income tax, employees NI, Employers NI, Brolly fee, Apprenticeship Levy (if applicable) and anything else the government wants to throw at you. The calculation you are doing is quite a simple one (I don't mean easy). You are effectively calculating your tax on a salary of £130000. If you go to a caculator this will give you a breakdown of these figures (£500 per day over a year) as if it were a permanent salary. You will potentially be due some of the tax back if you only stay a short period of time of course, depending on your other liabilities.

[cojak]

Very simple.

Use a proper, non-dodgy umbrella company. Contractor Umbrella has a very good reputation here from people who have used them.

[CodeMage]

So I've read a number of articles, posts from this forum and used the "IR35 calculator" which unfortunately doesn't provide any breakdown.

My situation is this: I am currently permanent employee in a private company in London for the last 5 years. I would like to switch to contracting in the same company for a few months and then move on. I understand that in such case I fall well within IR35. My question is - who pays what exactly and what can I pocket in the end?

For the sake of simplicity I've entered £500 daily rate a calculator. It says my net monthly income is £5000. Assuming 20 working days a month, this means that 50% of the total amount goes to taxes. That's a lot. So the calculator also says that the same outside IR35 would increase my net income by 20%. How does this work? Does the company I work for takes 20% cut, transfers me the rest of the money and then I pay a bunch of other taxes? What would those be in case like this? Thanks in advance, I am new at this.