Very new to contracting! Is it possible to calculate a PAYE rate from a Ltd rate?

[ilovehr]

Many agencies offer two rates for "contractors". The PAYE rate and the Ltd rate.

The PAYE rate is the rate they would pay you if you went on their payroll as a temp.

The Ltd rate is the rate they pay if you work though a brolly or through your own Ltd Co.

The last time I went brolly, the PAYE rate was uplifted by about 24% (Employer's NI and Holiday Pay)

Simples......

[Wanderer]

If I were to be being paid £20 p/h ltd and the ltd rate is 18 p/h is that just the agency taking their cut?

I presume you signed a contract before you started work? How much did that say you were to be paid? If it says £20 p/h then that's how much your LTD should be paid, (plus VAT if you are VAT registered).

As for how much of that is yours to keep and how much the company needs to retain to pay taxes, this is a question for an accountant as it depends on a number of things, primarily IR35. Some friendly advice is to get an accountant and get some good advice on how to operate your company. If you try and run a company without an accountant then you will end up in a LOT of trouble unless you know what you are doing.

[amcdonald]

Anybody heard of Employer's NI Contributions...?

HTH

Tax, I've heard of it

Life doesn't have to be taxing, just say no!

[malvolio]

Anybody heard of Employer's NI Contributions...?

HTH

[pmeswani]

Eh? You mean your contract rate is £20/hour? Assuming you're not a troll then how it works is:

You agree a rate with the agency
Your ltd company signs a contract with the agency
You bill the agency hour rate x hours worked

Your accountant gives you general advice about how much to pay yourself incurring PAYE and you draw more out via dividends.

I suspect you're talking about £20/hour as a ltd or £18/hour through an umbrella. If that's the case then yeah the umbrella is taking a slice for doing all the accountancy stuff for you, and they will pay you only PAYE. It's less tax efficient, but probably less hassle.

I may be wrong here, but I think the OP means that if the agent pays his Ltd Company or Umbrella, he gets £20 p/h. However, if the OP were to be put on the Agency Payroll, he would get £18 p/h. If that is the case, then the agency is taking the £2 p/h for the cost of processing the payroll and other admin stuff. I don't know if the MSC Legislation applies to agency PAYE system or not.

In relation to salary / PAYE through a Ltd Company, I agree that the OP needs to speak to their accountant about the best way to pay oneself. HTH

[b0redom]

Eh? You mean your contract rate is £20/hour? Assuming you're not a troll then how it works is:

You agree a rate with the agency
Your ltd company signs a contract with the agency
You bill the agency hour rate x hours worked

Your accountant gives you general advice about how much to pay yourself incurring PAYE and you draw more out via dividends.

I suspect you're talking about £20/hour as a ltd or £18/hour through an umbrella. If that's the case then yeah the umbrella is taking a slice for doing all the accountancy stuff for you, and they will pay you only PAYE. It's less tax efficient, but probably less hassle.

[fryerrobin]

If I were to be being paid £20 p/h ltd and the ltd rate is 18 p/h is that just the agency taking their cut? Is there anyway you can calculate what the paye rate should be?