First time one off contract. What should I do?

[LisaContractorUmbrella]

If I read it right, your agency are pushing you through a particular Umbrella company who are offering a specific dispensation. I would ask how flexible the dispensation is (i.e. what exactly can you claim in full) and if your food allowance is flexible, as your lunch (and / or breakfast) may be more than £5. I think you need to ask if the food allowance is specifically for lunch or can you also get breakfast included and what circumstances does this covers.

Also find out if your rate covers Employers and Employees N.I. and Income Tax, as that would affect the amount of take home pay you will get.

£26 + VAT a week does sound a lot to be honest for an Umbrella service, but I don't know what the going rate is these days. In any case, for a first contract (regardless if you want to go perm afterwards), I would recommend going via an Umbrella, regardless of the tax implications (unless you are on a long term contract and your rate is very high). As a rough guess, your rate is about £200 p/d, which, in my opinion, isn't worth going via a Ltd Company.

Unfortunately dispensations, by their nature, cannot be flexible. A dispensation just reduces paperwork for the umbrella company and does not determine what expenses an individual can or cannot claim. Subsistence would fall into the same catagory as travel in this instance - an expense claim would not be allowed as the OP would be going to a permanent work place.

[pmeswani]

Hi

I was made redundant at the end of March and have been living off redundancy insurance since then. My only income this tax year was a £15k share payment from my old employer. Tax was deducted at the lower rate.

I have been offered a 7 week contract starting on November 1st. The payment will be £12000.

I do not yet know what my income will be from January to March (if any), but I am looking for a permanent role and don't expect to remain contracting. My previous monthly gross salary was £5k.

What I need to establish is what is the most tax efficient way for me to handle this £12k payment. I have had a call via the job agency from a company called liberty bishop who have offered to pay me as an employee under an umbrella company for £26+VAT (deductible) per week. They take care of all paperwork. They said they can deduct my mileage at 40p per mile which would equate to a deduction of £1800, plus £5 per day for food (presumably this is the same for the self-employed options).

Alternatively could I earn more net, operating as either a sole trader or ltd company? If so is a local accountant the best option to proceed?

If relevant my wife works part time (21 hours pw) and earns £24k pa.

Any advice gratefully received. Thank you for taking the time to read this.

If I read it right, your agency are pushing you through a particular Umbrella company who are offering a specific dispensation. I would ask how flexible the dispensation is (i.e. what exactly can you claim in full) and if your food allowance is flexible, as your lunch (and / or breakfast) may be more than £5. I think you need to ask if the food allowance is specifically for lunch or can you also get breakfast included and what circumstances does this covers.

Also find out if your rate covers Employers and Employees N.I. and Income Tax, as that would affect the amount of take home pay you will get.

£26 + VAT a week does sound a lot to be honest for an Umbrella service, but I don't know what the going rate is these days. In any case, for a first contract (regardless if you want to go perm afterwards), I would recommend going via an Umbrella, regardless of the tax implications (unless you are on a long term contract and your rate is very high). As a rough guess, your rate is about £200 p/d, which, in my opinion, isn't worth going via a Ltd Company.

[Wanderer]

1. You can't work as sole trader through an agency
2. It's not worth setting up a ltdco for one contract
3. You can't claim mileage and/or subsistence for one contract

And that's the answer in a nutshell.

Go umbrella.

[NotAllThere]

Given that you've read the sticky, and Lisa's reply, what are your outstanding questions?

1. You can't work as sole trader through an agency
2. It's not worth setting up a ltdco for one contract
3. You can't claim mileage and/or subsistence for one contract

[guildfordred]

Yes I have read it thanks. I have specific circumstances that it doesn't answer. If I missed something then please feel free to let me know. Thank you.

[DS23]

what do you do?

[northernladuk]

You have of course read the Ltd V Umbrella sticky in this very forum?

[Steven@Parasol]

if you are working via a recruitment agency another option might be to work agency PAYE. All this means is that you are added to the agency's payroll for the period of your contract.

You cannot claim expenses etc on agency PAYE, but as Lisa explained, it doesn't sound like you would be able to anyway.

[LisaContractorUmbrella]

IF your intention is to return to permanent work after you have completed this contract you will not actually be entitled to claim travel expenses through an umbrella company. Travel expenses are only payable for travel to a temporary site; if you know that this contract will be your only employment with an umbrella company it automatically becomes a permanent site.

You could set up a Limited Company but you would only be better off if you were working outside of IR35; even so it is not really worth setting up and closing down a Limited Company and all that it entails for a 7 week contract.

If you are working through an employment agency it is highly unlikely that they would make payment to you as a sole trader.

[guildfordred]

Hi

I was made redundant at the end of March and have been living off redundancy insurance since then. My only income this tax year was a £15k share payment from my old employer. Tax was deducted at the lower rate.

I have been offered a 7 week contract starting on November 1st. The payment will be £12000.

I do not yet know what my income will be from January to March (if any), but I am looking for a permanent role and don't expect to remain contracting. My previous monthly gross salary was £5k.

What I need to establish is what is the most tax efficient way for me to handle this £12k payment. I have had a call via the job agency from a company called liberty bishop who have offered to pay me as an employee under an umbrella company for £26+VAT (deductible) per week. They take care of all paperwork. They said they can deduct my mileage at 40p per mile which would equate to a deduction of £1800, plus £5 per day for food (presumably this is the same for the self-employed options).

Alternatively could I earn more net, operating as either a sole trader or ltd company? If so is a local accountant the best option to proceed?

If relevant my wife works part time (21 hours pw) and earns £24k pa.

Any advice gratefully received. Thank you for taking the time to read this.