Locum job alongside FT job....tax issues

[LisaContractorUmbrella]

You also need to take into consideration that you will be taxed on your whole earnings as a locum as they will count as secondary income

[JamJarST]

I am still amazed how people take on the financial and legal responsibilities of limited companies without a clue what it is about.

Yeah, I spent weeks reading up on my options before I went ahead with company formation. My background was financial and I still had to do that research.

[Greg@CapitalCity]

I am after some advice here on what I can do. Any advice would be appreciated.

You have three options with your contracting work - you have mentioned two of them here, the third is to use a PAYE umbrella. Choose the option that suits your circumstances best - it is not a one-size fits all situation. Here are some things to consider (When doing the tax calculations below I have assumed your full-time salary is £30,000 a year, and you get £200 for the locum work - while this may not be correct for you, it will help you get a flavour for things - I have ignored expenses on the assumption they will be roughly the same for all three options, and I assume you are not caught by IR35)

(1) PAYE Umbrella
Easy and fast to set-up, no hassle. This is your 'easiest' option (since you mention below about being worried of your responsibilities with a ltd company). In terms of tax, and net take home pay, its your worst option - but you need to balance that with ease you get. Your total monthly earnings would be 4x£200 = £800. Net take home pay = £599 excluding the umbrella's fee.

(2) Self Employed
Slightly harder. You need to register with the tax office as a self-employed person, and look after your bookkeeping. At the end of the personal tax year you tally up all your earnings in your personal tax return, and pay PAYE and NI on the profits. Lower tax and a better take home pay than option (1), but slightly more work for you. Your total monthly earnings would be 4x£200 = £800. Net take home pay = £622 assuming you did not pay an accountant, and excluding your Class 2 NIC of £2.50 per week.

(3) Limited company
The hardest option if you are going to be looking after things yourself. Many on this board will say don't even try to do it yourself, instead use the services of an accountant. While this will most likely be your most tax efficient option, for the quantity of work you are doing, an accountants fee will probably absorb most/all the tax savings of using a ltd company, making this option a waste of time for you. Your total monthly earnings would be 4x£200 = £800. Net take home pay = £640 assuming all profits taken as a dividend, and excluding an accountants fee.

On balance I would say your best option is to go self-employed, but the decision needs to be balanced against how much effort you want to put in, ease and simplicity, and of course, take home pay.

Good luck.

[northernladuk]

I am still amazed how people take on the financial and legal responsibilities of limited companies without a clue what it is about.

[SueEllen]

I don't know who told you to open a limited but they obviously didn't tell you about the paperwork you have to submit to Companies House every year as well as doing your self-assessment as a director.

Anyway look over to the right hand side and you will see a box with the title "CUK Navigation". Click on "Limited Companies" and start reading.

[flaky247]

Hi All
I am a newbie so apologies if I ask any naïve questions here, I am a pharmacist who has just qualified although I have a full time job, I intend to partake in locum work as well (freelance) or what you guys term contracting (approximately 4-6 shifts a month). I have opened a ltd company, this was done with little advice but I am not sure if it’s the best option for me, I am ok to do my own paper work as I don’t expect it to be very involved/complicated like a career contractor, instead what I intend to do is just keep my spreadsheet up to date and be more enlightened.
I have been told be someone that I can easily do a self assessment instead of all the responsibilities that comes with being a director of a ltd. I am after some advice here on what I can do.
Any advice would be appreciated.