Reply to: Do you earn a lot but chose to work through an umbrella?

[cojak]

I demerited you for not behaving in the Professional forum - and this is now straying into bickering territory, so for that I am locking this thread.

[Mose]

EscapeUK – I’ll be careful with my words to make sure this isn’t personal so as not to upset moderators and your mates. You came into this thread and set up a false dichotomy which is inherently wrong – the fact that a spread of options exist to match a spread of personal requirements is not up for debate. In other words; that your sums are right does not make everyone else wrong. This is not a dilemma. You have fallaciously created one to inflate the importance of your point.

Your overall view that for some the financial implication is significant is almost certainly of interest to some, but reinforcing an opinion by setting up others in what is an Aunt Sally attack was daft and not at all appropriate for the question asked. Straw man attacks are a clear indicator that someone has not thought through what they mean to convey.

That others would rather the topic being discussed was the one you were discussing, and that it is the norm on this forum for bitter people to bash agents, HMRC and brolly companies doesn’t in any way correct your initial failing – for example that 5 people take “your side” doesn’t make you 5 times more right, truth is not democratic. It’s just a collective of people being ignorant together with self fulfilling criteria for success.

You didn’t answer the question asked, you answered the one you knew the answer to, and were insulting along the way. Playing the victim when someone chats back with moderators messaging some kind of demerit mark for putting forward an unconventional point of view is weak.

[northernladuk]

Thanks for the support guys. I thought I was being helpful with examples that took me a little while to work out and type up.

The only thing I regret about becoming a contractor is that I wasted a lot of money working via an umbrella, because I wasnt 100% sure this was the right move for me and I thought all the accounting work would be a large burden. Back then I hadnt realised just how much this uncertainty was costing me, and having gone the Ltd route it is nothing to be worried about, and an accountant is far far cheaper than paying two lots of NI!

Great example that. Very clear so can't really see the argument. I would suggest the OP tries the same calcs with his numbers though as it is just an example.

I did the same but for 6 months and the loss of money does smart but I don't regret it. It was a great learning curve while I concentrated on being a contractor. Once I had that sussed I went back to my finances. What I learnt from the umbrella experience I was able to use going forward. Have lost a lot more money on women and beer so can't go round regretting everything I lose money on

[cojak]

I have asked for the bickering to stop please. Apart from that escapeUK has done nothing wrong in this thread FYI.

[escapeUK]

Thanks for the support guys. I thought I was being helpful with examples that took me a little while to work out and type up.

The only thing I regret about becoming a contractor is that I wasted a lot of money working via an umbrella, because I wasnt 100% sure this was the right move for me and I thought all the accounting work would be a large burden. Back then I hadnt realised just how much this uncertainty was costing me, and having gone the Ltd route it is nothing to be worried about, and an accountant is far far cheaper than paying two lots of NI!

Waldorf also makes an excellent point re the flat rate vat scheme, which I also joined on recommendation of my accountant and reading this forum. This in itself generates £1000s of extra income each year.

The Nixon Williams calculator would have saved me a bit of time! It calculates the figures I worked out in seconds! lol

The blinkered, presumptuous and arrogant views in this thread are unpleasant. People setting up straw man arguments so they can rant about whatever they feel makes them look important on the internet is pathetic behavior.

But the reason you are wrong is, there is no additional work involved. You pay £100 a month to the accountant and save £900 in the example. If someone taking the time to give an example that I thought would be beneficial to you is somehow an attack or being unpleasant then I feel that is irrational.

But please try not to end up with this topic closed as Im sure it could be beneficial to those starting out who dont realise how much difference it really makes.

[Mose]

ITT:

Original question:

I know there has been a lot of threads on why a Ltd is better so not asking that but I'm interested in people who earn a lot but still choose to work through an umbrella company rather than go down the Ltd route.

So a fair question on why someone might accept a lower retention that the theoretical legal max.

Followed by some good general points from people, and a good post from Chef adding more potential insights.

Then my simple post:

Yeah, I'm on a high rate and choose to run through an umbrella. There are many small reasons but the only one that matters is that the difference in income is less than I consider the additional work to be. I don't begrudge them their fees at all, I'm happy to pay it for the entirely stress free service.

Not at all suggesting that you don’t get higher retention with alternative solutions, later I added the difference in income is probably a few grand.

Then unless I’ve missed something and some posts have been deleted, EscapeUK goes off on one to break down some entirely uninteresting figures, accuses me of living in a fantasy world whatever that means, then uses some calculators to show the ‘difference’ is in fact a few grand (with a somewhat comical qualifier of “and I should know…”) followed by a few guys pitching in to back him up discussing the financial differences between employment solutions.

All this would be peculiar itself without the childish digs that somehow people less intelligent than himself should support a countries tax burden, or that my rate is not as high as I had imagined. Only with self-important language and utterly insane text highlighting. Nutty use of punctuation too.

£11k is not enough money to change my arrangements, it’s simply not much money to me, it’s not enough for the extra admin. Besides which, it’s not £11k anyway, £6-£7k would be nearer the mark. I run two active ltds, one to care for patent and intellectual property income, the other unrelated to tech. Complicating this to cover contracting would be unwise as both are invested by additional parties. I work offshore about half the year in an unrelated industry which pays better than tech contracting but you can’t use ltd solutions, and can’t work all year. When in the UK and not with my client here I work in a social enterprise operation and not-for-profit company, so time is extremely limited. I'm also overhauling a boat which is time consuming. There is no shortage of money coming in from many and various avenues, time is much more valuable.

These factors mean that from the solutions available, the brolly is most advantageous.

The blinkered, presumptuous and arrogant views in this thread are unpleasant. People setting up straw man arguments so they can rant about whatever they feel makes them look important on the internet is pathetic behavior.

[stek]

He quoted your post where you said "it's probably only a few grand a year".

He then worked an example to show even on a low rate (£300/day) with no expenses factored in, although based on 52 weeks, the difference was £11k+

Case closed! Who's the moron now, Mose?

[psychocandy]

You are living in a fantasy world. And I should know as I have worked for over a year via Umbrella and 3 years via Ltd.

Lets take some examples, lets base on £1500 a week and run some examples. Ive based on working 52 weeks (unlikely I know) this gives £6500 a month, £78,000 a year. For arguments sake I am going to expense nothing, as both Umbrella and ltd can do this and I am trying to show just the difference.

Lets do Umbrella first, using contractor umbrella's calculator

Employer's NI 702.25
Employee's NI 393.38
Employee Tax 1,442.07
Total All Tax 2,537.70
CU Margin 85.00
Total Net Income 3,877.32 therefore yearly income £46,527.84

So Ltd, Im going to base on taking salary of £7488 the rest goes in Dividends (£70512 - 20% corp tax = £56409. Lets put that through the dividend tax calculator.

The extra tax to pay is £6,229 (11.0% of net dividend).

Band Rate Lower Limit Upper Limit Tax
basic rate 10% 0 £34,370 0
higher rate 32.5% £34,370 £150,000 £6,229

Total Tax: £6,229


Yearly income = £57,668 therefore £4805.66 per month

Difference is £928.35 a month or £11,140 per year!!!!!!

Calculators used were from Umbrella Company IR35 Calculator : Contractor Umbrella and <snip>

Very interesting. Scary reading for those, like Mose, who cant be arsed and kid themselves into thinking brollie is just as good.

Dont get me wrong, going brolly is OK for some people in some circumstances, but its gonna cost you a lot of money long term.

Im willing to do a few spreadsheets and paperwork for a £1000 a month anyway...

[jmo21]

Wut? I didn't put up any sums. The really super experienced guy who would know as he has amassed over 4 solid years in the seat, including over a year with an umbrella company, put up the apparently in depth detailed analysis of my finances...

He quoted your post where you said "it's probably only a few grand a year".

He then worked an example to show even on a low rate (£300/day) with no expenses factored in, although based on 52 weeks, the difference was £11k+

[psychocandy]

Wut? I didn't put up any sums. The really super experienced guy who would know as he has amassed over 4 solid years in the seat, including over a year with an umbrella company, put up the apparently in depth detailed analysis of my finances...

I don't know why they bother keeping this forum going - everyone might as well just e-mail this guy personally, he probably knows every single thing about contracting. 4 years! I can only dream of what it must be like to be some worldly.

Mod snip > rather unnecessary unpleasantness... <

Moron.

To be fair to EscapeUK he was only quoting an example of the difference in the two methods.

[captainham]

Wut? I didn't put up any sums. The really super experienced guy who would know as he has amassed over 4 solid years in the seat, including over a year with an umbrella company, put up the apparently in depth detailed analysis of my finances...

I don't know why they bother keeping this forum going - everyone might as well just e-mail this guy personally, he probably knows every single thing about contracting. 4 years! I can only dream of what it must be like to be some worldly.

Mod snip > rather unnecessary unpleasantness... <

Moron.

Calling somebody a moron because you don't understand their point is very grown-up.

The point escapeUK was making was a side-by-side comparison of Brolly vs. LtdCo, taking the same base income as the starting point. The lunatic is the one that doesn't realise a LtdCo allows you to take home more cash versus a brolly, assuming of course that you are outside IR35 and that you are prepared for the extra hassle of running a LtdCo (although this is minimal in my opinion).

It wasn't an in-depth review of your finances because how can he possibly know what they are? It was an example, as highlighted by the sentence that started with "Let's take some examples..."

[Waldorf]

Among other factors, working through a brolly will possibly prevent you from gaining from the vat flat rate system, this calculator compares the two and allows you to enter the main factors to consider,
https://www.nixonwilliams.com/net_pay_calculator.asp

[Mose]

Wut? I didn't put up any sums. The really super experienced guy who would know as he has amassed over 4 solid years in the seat, including over a year with an umbrella company, put up the apparently in depth detailed analysis of my finances...

I don't know why they bother keeping this forum going - everyone might as well just e-mail this guy personally, he probably knows every single thing about contracting. 4 years! I can only dream of what it must be like to be some worldly.

Mod snip > rather unnecessary unpleasantness... <

Moron.

[Wanderer]

escapeUK makes a valid point, if u r even on a moderate rate, a brolly is costing u many thousands, so either ur rate is dead low or you have ur sums wrong.

Or you are caught by IR35...

[stek]

what a mental post!

What exactly is your point????

escapeUK makes a valid point, if u r even on a moderate rate, a brolly is costing u many thousands, so either ur rate is dead low or you have ur sums wrong.