Contracting and Marriage! (Don't run!)

[Zorba]

I've been reading with interest up to now and just feel I should chip in on the organisational thing.

I am quite disorganised and so I was quite concerned about the unknown amount of paper shuffling I would have to do as a Ltd, especially since a lot of it is a legal duty and can get you fines if you lose it/don't do it.

I looked at the umbrella option but I finally went Ltd straight away for the following reasons:

1) Returns: umbrellas generally give you back less £££ than a Ltd.

2) I'm disorganised and I like an easy life: if I started with an umbrella, chances are I'd still be with one to avoid the hassle, and would also lose out on (1).

3) The paperwork and learning curve are not that deep at all. As has been mentioned above, 20 mins a week is enough to stay on top of it. To add to that, set up a decent filing system from the start and buy a shredder. When post comes in, shred the garbage immediately and file the business stuff. I made a file for statements, one for other banking, one for invoices, one for receipts, one for insurance, one for contracts, one for expenses, one for VAT and one for Other Tax. At the end of the first year, I put the relevant documents together into another folder marked for that year. People probably have better systems but I needed one that I could cope with. On top of that my accountacts (SJD) are a goldmine of advice - a bit like this forum but with a little less sarcasm.

4) Control: I want to keep the chain between myself and the client (or rather his cheque) as short as possible.

5) Changing payment/business details mid-contract can be awkward, and some contracts can go on for quite some time.

In the end though, I think we'd still be interested to hear what you decide to go for and why. It might inform someone else's future decision too.

[ruth11]

Thanks Old Greg - did you go limited right from the start or did you use a brolly for a couple of months to start with? I'm thinking I might use Parasol for a little while whilst I get used to the new life and then sort out my company a bit later, when I'm a bit more savvy to how things work!

I feel a bit different today - it's hit home over night what I've done and although I've been talking about it for ages, I don't think I really understood what I was doing. Don't get me wrong, I'm not regretting it - in fact completely the opposite! I find myself thinking about what technologies I should learn now to make myself more marketable and that's an exciting thing for me!

[Old Greg]

He is a supportive Husband - he's gonna have to be when I'm sitting at home with no job!
It's not the contracting he has a problem with, it's my setting up a Ltd company to do it through.

Anyway, I just wanted to share my good news with you all today! I resigned, no job to go to but in my resignation letter I offered to extend my notice period to help them out whilst they find a replacement for me. They have not only taken me up on this offer, but have said that they will keep me on until I want to leave, on a rolling one week notice (after my 4 weeks is up)! It's going to take at least 6-8 weeks to replace me and so even if I don't get a contract in that time, I can still work there until I do! I assume there will be a point where they can't justify paying me and my replacement but they said that if I wanted to stay, they'd even keep me on to handover properly to the new guy! So it seems being nice to your employer, pays in the end! I couldn't have asked for more really.
And at least I know I'm going to get a cracking reference from them - they talked about whether they could persuade me to stay, but realised that it's a lifestyle choice I've made and an increase in my salary there wasn't going to really do it, so they've wished me well and all's good with the World!

Well done and welcome on board - I did the same in February.

As far as running the Ltd is concerned, I'm really disorganised normally but I've managed to get myself a 'business head' - just spend 20 minutes per week sorting everything out. And get a good accountant. Good luck!

[ruth11]

He is a supportive Husband - he's gonna have to be when I'm sitting at home with no job!
It's not the contracting he has a problem with, it's my setting up a Ltd company to do it through.

Anyway, I just wanted to share my good news with you all today! I resigned, no job to go to but in my resignation letter I offered to extend my notice period to help them out whilst they find a replacement for me. They have not only taken me up on this offer, but have said that they will keep me on until I want to leave, on a rolling one week notice (after my 4 weeks is up)! It's going to take at least 6-8 weeks to replace me and so even if I don't get a contract in that time, I can still work there until I do! I assume there will be a point where they can't justify paying me and my replacement but they said that if I wanted to stay, they'd even keep me on to handover properly to the new guy! So it seems being nice to your employer, pays in the end! I couldn't have asked for more really.
And at least I know I'm going to get a cracking reference from them - they talked about whether they could persuade me to stay, but realised that it's a lifestyle choice I've made and an increase in my salary there wasn't going to really do it, so they've wished me well and all's good with the World!

[Spacecadet]

My husband, on the other hand, seems to think I won't be able to hack it cos I'm not the most organised of people and he thinks I won't want to do the work involved.

Sounds like a very supportive husband.
Has he ever been a contractor?
Once you've got your first contract make sure he knows who the main bread winner in the house is

[TheRightStuff]

If he is a "shareholder" then he will recieve dividends, the amount of tax he pays on these divi's will take into account his salary - better to keep him out of the picture until such time as he decids to go contracting as well - then you can just employ him !!

and then fire him soon afterwards for being so negative.

[Bluebird]

His salary doesn't impact you, either personally or your limited company, in any way.

If he wanted to become a contractor, he could do it through your company, either as an employee paying PAYE, or as a shareholder taking a smaller salary and dividends.

If he is a "shareholder" then he will recieve dividends, the amount of tax he pays on these divi's will take into account his salary - better to keep him out of the picture until such time as he decids to go contracting as well - then you can just employ him !!

[ruth11]

Thanks for the info guys, and sorry for the delay in replying, it's been a busy week! I'm hoping to be outside of IR35 but I guess that remains to be seen on what my first contract is.
Thanks again.

[oraclesmith]

I am in a similar situation. One thing to watch is the shareholder and dividends situation.

Assuming your husband is earning over or near to the upper earnings limit (40% tax bracket).

It's generally a good idea to have a spouse as a shareholder, not necessarily for divi's, but to ensure continuity. However, that shareholder is entitled to their exact share of the dividends, so they may need to pay extra tax on them if they are a high earner and not the usual little wife/hubbie at home.

What you decide depends on what you each earn. Personally, we have 50% of the company's share each but I allow my wife's divi's to be taxed on me, as a settlement (ie. go along with HMRC's S660A), which means her tax situation is unaffected (and uncomplicated).

In hindsight, it may have been better for me to take 90% or more of the shares when I set up the company. It can be tricky allocating more shares to yourself at a later date, for various reasons.

I also keep more money in the company than other contractors, to fund other business ideas.

[Gonzo]

Hello
I'm just about to take the plunge and hand my notice in to my nice safe permanent job to go out into the big bad world of contracting.
I've been considering my options about Umbrella vs Limited and am leaning towards Limited. My husband, on the other hand, seems to think I won't be able to hack it cos I'm not the most organised of people and he thinks I won't want to do the work involved. I still think it's the way to go and as long as I find a decent accountant, hopefully my actual work requirement won't be too much.
This aside (it's not really the point of my post so sorry for rambling!), but I was wondering what affect my husband has on my Limited company if I go this way? He is also an IT pro working in a permanent role and happy doing that. Does his current salary affect my earnings in any way if he is part of my company (say, as company secretary)? What would happen in the future if he wanted to start contracting? Could he use my company or would that not be cost effective?
Thanks

If you use an accountant that is used to dealing with IT Contractors (the names get bandied around here a lot) then the amount of effort that you will need to put in to running your own limited company is small, really, miniscule.

A limited company is a separate legal entity in its own right and even if you make your husband an officer of the company, say as company sec, then his permy earnings have absolutely nothing whatsoever to do with it.

Things will only start to get complicated tax wise if you make your husband a shareholder in the company, but if he has separate income then I cannot see any tax advantages of doing that.

There is no obvious reason why he couldn't use your company to contract through in the future, but then you would need to think about how he would get paid, which would probably mean making him a shareholder, and for the small sums that you would save by running one company instead of two the added complications are not worth it in my opinion.

Usual disclaimer, I am not an accountant, I am not authorised to give financial advice, I have been proven wrong on many occasion, etc etc.

[TheFaQQer]

Hello
I'm just about to take the plunge and hand my notice in to my nice safe permanent job to go out into the big bad world of contracting.
I've been considering my options about Umbrella vs Limited and am leaning towards Limited. My husband, on the other hand, seems to think I won't be able to hack it cos I'm not the most organised of people and he thinks I won't want to do the work involved. I still think it's the way to go and as long as I find a decent accountant, hopefully my actual work requirement won't be too much.
This aside (it's not really the point of my post so sorry for rambling!), but I was wondering what affect my husband has on my Limited company if I go this way? He is also an IT pro working in a permanent role and happy doing that. Does his current salary affect my earnings in any way if he is part of my company (say, as company secretary)? What would happen in the future if he wanted to start contracting? Could he use my company or would that not be cost effective?
Thanks

His salary doesn't impact you, either personally or your limited company, in any way.

If he wanted to become a contractor, he could do it through your company, either as an employee paying PAYE, or as a shareholder taking a smaller salary and dividends.

[chris79]

There are a lot of factors to be considered.

Are you working inside or outside IR35? This will probably help you decide whether to setup as a limited, or just go PAYE with an umbrella company. If you setup as a limited then most likely you will need to hire an accountant to do your accounts, they can advise on your tax issues, your husbands position etc.

If you go umbrella as PAYE then most likely you dont need to worry much about accountants, tax implications etc, as your husband wont be the company secretary.

Again this all comes down to inside or outside IR35, and how you want to play it.

As you are new, I would recommend drawing up a list of potential umbrella companies to use, learn what they charge, how they operate, how they are setup, then maybe post the details on here and ask for some feedback on those already using their services to help you find a good one.

Going limited if you are outside IR35 will put more money in your pocket, but it's a bit more involved, especially now that the new legislation came into effect in April meaning that the big companies can no longer do all the work for you and pay you a directors fee / dividends as your choice of payment.

Don't take my advice here as gospel, it's just my own opinion based on my own 1 year contracting experience.

[ruth11]

Hello
I'm just about to take the plunge and hand my notice in to my nice safe permanent job to go out into the big bad world of contracting.
I've been considering my options about Umbrella vs Limited and am leaning towards Limited. My husband, on the other hand, seems to think I won't be able to hack it cos I'm not the most organised of people and he thinks I won't want to do the work involved. I still think it's the way to go and as long as I find a decent accountant, hopefully my actual work requirement won't be too much.
This aside (it's not really the point of my post so sorry for rambling!), but I was wondering what affect my husband has on my Limited company if I go this way? He is also an IT pro working in a permanent role and happy doing that. Does his current salary affect my earnings in any way if he is part of my company (say, as company secretary)? What would happen in the future if he wanted to start contracting? Could he use my company or would that not be cost effective?
Thanks