Back contracting after 2 years perm

[pr1]

So your nominal tax rate is 19 + 7.5, 26.5% - Once you move into the higher tax band it goes up to 19 + 32.5 = 51.5%. Above 100K the personal tax allowance is reduced, above 150K you are on a straight 19+38.1 = 57.1% rate.

nearly, the 7.5%/32.5%/38.1% is on the actual dividend paid (not the profit) so your totals should be

19% + 7.5% - 19%*7.5% = 25.1% basic
19% + 32.5% - 19%*32.5% = 45.3% higher
19% + 38.1% - 19%*38.1% = 49.9% additional

[TheFaQQer]

Oddly the accountancy side has changed in that time and I'd have said a FA accountant would have been the way to go

I think that InTouch can also offer FreeAgent as an additional service.

[northernladuk]

Oddly the accountancy side has changed in that time and I'd have said a FA accountant would have been the way to go

[TraceRacing]

Thanks to SueEllen who pointed me in the right direction regarding the IR35 determination (which was the original question). I've requested a copy of the determination from the client via the agency as I'd be short about £110/day on the rate if it was inside IR35.

For those who didn't read the rest of my posting I'm back with InTouch as my accountants who've been busy setting up all the required paperwork and I'll use their guidance regarding salaries / dividends etc as I did previously. I was just looking at what changes have occurred in the past 2 odd years.

[Stevie Wonder Boy]

The idea of running your own LTD OP is that you pay yourself minimum wage (this will actually be nothing in this tax year as you will certainly be above the tax free £11k?? threshold) and then pay yourself in dividends, which attracts a lower tax amount. (7.5% after the first £5k which is tax free, up to just over 30k after which it rises)

Travel expenses are allowable providing your "home office" is your regular place of work and your client requires you to be on site. After 24 months this changes (search 24 month rule)

As NLYUK said - get an accountant. I use SJD and opted for premium - they set absolutely everything up for me, give me their registered office address with free postal forwarding, 5 million PI insurance via Hiscox, etc. They're expensive but worth it IMO.

Good luck and welcome back to the market.

Just a minor correction - Dividends are paid out of profits, so you will be liable for Corporation tax at 19%. In April the tax free dividend allowance goes down to 2K I believe.

So your nominal tax rate is 19 + 7.5, 26.5% - Once you move into the higher tax band it goes up to 19 + 32.5 = 51.5%. Above 100K the personal tax allowance is reduced, above 150K you are on a straight 19+38.1 = 57.1% rate.

Salaries, Empoyer NI and Employee NI are classed as an expense, so don't attract corporation tax.


So what will get you is the corporation tax bill 9 months after your company year end. So last year with 20% corporation tax, if you took 1,000 as a payment from the company, the actual dividend was 1,250 i.e. £250 or 25% of what you paid yourself. You have been warned. This will be in addition to the dividend tax on your personal taxes in due in January.

[quackhandle]

You could get one that uses FreeAgent (others are available) but FA gets my vote, wish I'd done it sooner.

qh

[SueEllen]

The idea of running your own LTD OP is that you pay yourself minimum wage (this will actually be nothing in this tax year as you will certainly be above the tax free £11k?? threshold) and then pay yourself in dividends, which attracts a lower tax amount. (7.5% after the first £5k which is tax free, up to just over 30k after which it rises)

That's not correct.

You don't need to pay yourself "minimum wage" you need to pay yourself a wage which is sufficient to get NI credits.

This is why you need an accountant versed with contractors as they will know this and do your payroll accordingly.

Simon Dolan has a new accountancy firm which will probably suit you. He use to own SJD Accountants.

[mattfx]

The idea of running your own LTD OP is that you pay yourself minimum wage (this will actually be nothing in this tax year as you will certainly be above the tax free £11k?? threshold) and then pay yourself in dividends, which attracts a lower tax amount. (7.5% after the first £5k which is tax free, up to just over 30k after which it rises)

Travel expenses are allowable providing your "home office" is your regular place of work and your client requires you to be on site. After 24 months this changes (search 24 month rule)

As NLYUK said - get an accountant. I use SJD and opted for premium - they set absolutely everything up for me, give me their registered office address with free postal forwarding, 5 million PI insurance via Hiscox, etc. They're expensive but worth it IMO.

Good luck and welcome back to the market.

[northernladyuk]

Firstly apologies for not making full use of the search function...but I'm against the clock so to speak...

I was made redundant from a perm role on Friday... had an interview yesterday and was offered a 6 month contract this morning to start on Monday.... (BOOM )

The role is classified as outside IR35 which means I can run it via a LTD (busy getting that set up now as I closed the previous one 2 odd years ago). Who makes the decision regarding in/out of IR35 (agent / client) and does that mean they are on the line for any IR35 queries?

As I understand the latest regs, out of IR35 means I can still claim travel etc but my dividends attract tax and NI at both the EE/ER level... is this correct? (Yes, I will ask my accountant but she's busy setting up my company / VAT / PAYE etc)

Any other useful advice would be appreciated.

Have you got an accountant? If not, there are some recommendation in the Accountancy section. Things seem to have moved on so some of the big contractor specialists have been bought out and appear to have lost their shine a bit.

[kaiser78]

Make sure you start building a warchest. Your type is going to need it.

Give OP a chance !

OP - have a look at the first timers stuff and also arrange an overview with your accountant to go through the various areas of consideration to update/refresh yourself.

[BrilloPad]

Make sure you start building a warchest. Your type is going to need it.

[pr1]

my dividends attract tax and NI at both the EE/ER level... is this correct?

no, they only attract dividend tax

[TheFaQQer]

Quite a lot has moved on in the past couple of years - even though you've done it before, it may be worth downloading a copy of the Be Your Own Boss guide from IPSE (available via the home page) which gives a lot of information that could be handy when you're coming back.

As a start, it looks like your understanding of dividends are wrong so have a look at the "first timers" guides available even though you're not a first timer.

And welcome back to contracting

[SueEllen]

Are you in the public sector?

If so there is an entire forum with information on this. This is the forum - http://forums.contractoruk.com/public-sector-ir35/ Read the stickies at the top of it.

If not then it is the normal working practices and contract which you should get reviewed before signing the contract.

[TraceRacing]

Firstly apologies for not making full use of the search function...but I'm against the clock so to speak...

I was made redundant from a perm role on Friday... had an interview yesterday and was offered a 6 month contract this morning to start on Monday.... (BOOM )

The role is classified as outside IR35 which means I can run it via a LTD (busy getting that set up now as I closed the previous one 2 odd years ago). Who makes the decision regarding in/out of IR35 (agent / client) and does that mean they are on the line for any IR35 queries?

As I understand the latest regs, out of IR35 means I can still claim travel etc but my dividends attract tax and NI at both the EE/ER level... is this correct? (Yes, I will ask my accountant but she's busy setting up my company / VAT / PAYE etc)

Any other useful advice would be appreciated.