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Previously on "Advice needed on whether to go Limited for a 3 month contract"
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As an accountant i agree with the above.
The take home pay of 80% is a general comparison based on you being a basic rate tax payer.
It does not take into account your other personal income from other sources for example Rental income, interest and dividends from other companies.
So as i and other accountants have said call a few accountants and ask them if they will do a income comparison which is specific to you.
Hope that helps
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Originally posted by fdama View Post@clare@intouch
The fees that SJD charge are approximately £150 for the initial setup, £130 per month for accounting and £150 to shut the company down. With these fees, won't I benefit from going Limited considering that I will take ~80% of the turnover as opposed to ~60% under the Umbrella?
Looking forward to your replies.
The reason a limited company gives a take home of 80% is that it assumes most of your dividends are basic rate and therefore tax free - that may well not be the case for you. What you need to do is get a full review of your whole year's income in order to establish the real tax suffered for you specifically, not a generic income comparison that assumes a whole years trading and doesn't take account of other personal income.
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What exactly is it that you are going to be doing? You cannot rely on someone saying 'most people are outside IR35' to make your decision on how to operate. What are your working practises, are there permies at the site doing the same job that you will be doing, do you have to supply any equipment???
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Thanks for all your replies.
@LisaContractorUmbrella
First question would be - are you inside or outside of IR35? Second question - do you intend to contract again after this 3 month contract is over? In answer to whether there is something you are not being told about the set up and shut down costs - nope
When this contract is over I may or may not go contracting again. It all depends on my circumstances and what opportunity comes my way, whether Permanent or Contract.
@northernladuk
Other option is to screw yourself over and put yourself in trouble before you even got your 2nd one.
@clare@intouch
For a three month contract you'd be looking at around £18,600 turnover, so you're not going to make a massive amount of profit under a limited company once you take into account the professional fees for starting a company, running it, then closing it
Looking forward to your replies.
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For a three month contract you'd be looking at around £18,600 turnover, so you're not going to make a massive amount of profit under a limited company once you take into account the professional fees for starting a company, running it, then closing it. Have to agree with NLUK that brolly would be my advice, unless there's a good chance you'll get another contract after this one or use the company again in future.
I would suggest you call a few accountants and ask them for income comparisons so you can see the exact amounts you'd take home under each option, then you can decide if the extra £ is worth the effort of starting a limited company only to close it again soon after.
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I would advise you went umbrella for three months. It looks like you are struggling with this whole contractor thing. If deciding how you want to run your finances is difficult for you you are going to need time to grasp the culture of contracting, IR35, expenses and so on. Going umbrella won't be the most effective method (if outside IR35) but it is easy and won't kill you for 3 months.
Just to note. I went umbrella for 3 months to start as well. Nice easy intro, got my head around contracting while doing more research on LTDs and got my first contract under my belt.
Other option is to screw yourself over and put yourself in trouble before you even got your 2nd one.
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The main things to be aware of is are you inside or outside IR35 and do you intend to contract after the 3 month contract?
If you are looking to be a full time contractor then having a limited would be the best option.
Why not ask your potential new accountant if they can produce a schedule of what you would take home if you were limited and compare what you would take home if you were Umbrella.
Make sure you include all the expenses you would take over the 3 months.
i am sure they would be happy to do that for you as i a do for my clients
good luck
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First question would be - are you inside or outside of IR35? Second question - do you intend to contract again after this 3 month contract is over? In answer to whether there is something you are not being told about the set up and shut down costs - nope
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Advice needed on whether to go Limited for a 3 month contract
I've started a contract this week and I am stuck in the process of choosing between the limited or the umbrella route. This is not my first contract. I had contracted about 3 years ago for 6 months and at that time I used an umbrella as the pay was not high (~£25,000). This time round, the contract length is around 3 months and is £310 per day. If I was to go for umbrella, as you know, I would be hit financially, but would get to keep ~80% of the contract value if I were to go Limited.
I want to go Limited, however it is said that it is not an easy process. I spoke to an accountant, SJD accountancy, and they said that I would be better off with Limited. You may say to yourself that they would say that in order to sign me up as one of their clients. What they had said was that they would open the company for me and do the initial setup, which will cost (£110) and after 3 months if the contract has not been renewed and if I dont find another contract or enter into a permanent contract, then I would just pay something like £150 to shut it down. They also do a free IR35 review. They charge £130 per month for accounting fees.
If you look at those figures, I think I would be better off going Limited rather than Umbrella. What I really need is some independent advice from people on this forum as I am already 3 days into my contract and need to make a decision whether to go Limited or Umbrella tomorrrow. Is there something I am not being told? Are there any risks by going Limited in my situation?
Thanks in advance.Tags: None
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