Should I trade as a Limited Company, umbrella or composite

[Dalek Supreme]

"Heavy" fees? Which umbrella or composite do you work for then?

[contraspirer]

Comparison with Permie figures?

Hi All,

I have never contracted before and all my previous work ex has been in permanent roles.

But lately going through jobsites like Jobserve,etc i found that Contract roles pay way too much than permanent roles and deserved due attention!.

After googling a bit i came across this wonderful site and then eventually this wonderful post by SJD. The comparison chart for Own Ltd Co, Umberalla and Composite was very helpful.

But to take a final decision i needed a comparison with take home figures in Permanent roles. Googling more didnt help, so I just visited some gov.uk websites and checked up on the basic income tax calculations(the slabs et al) and NIC calculations(97 to 645 , 11% etc) . A basic calculation using 50000 p.a. as gross income gave me the following figures.

Gross Income £50,000 p.a.
Income tax £11,733 p.a.
NIC £3,134 p.a.
Net Income £35,133

Income for 3 years 35, 133 * 3 = £105,399 p.a.

If i compare this figure with the chart mentioned earlier. I dont see too much gain in contracting , in fact, with the Umbrella and Composite option it wouldnt make sense to contract at all!(if the decision to contract is based solely on financial gain of course)!.

How much will I take home?

Outside IR35

If you fall outside IR35 the comparative income to you on the three choices, would be as follows, taken over a three year period:

Contract value Own Ltd Co Umbrella Composite
£50,000 pa £107,609.74 £89,595.48 £100,590.86
£75,000 pa £148,510.44 £124,251.50 £138,490.02
£100,000 pa £189,410.75 £158,898.50 £171,764.77

Am i missing out on something here? Have my calculatioins gone awefully wrong ? Whatever the case, please enlighten me and help me make a informed choice.

Cheers!

[malvolio]

You only really missed a few minor details, such as no holiday pay, no SSP, no healthcare, no pension, no paid bank holidays, no pay when not working, typically working 8 months a year, having to pay employee and employers business taxes, having to carry insurance for PI, major illness, chronic illness and healthcare, no car allowances , the cost of some sort of accountancy support, no training and no certaintly that you aren't going to get smacked with a tax investigation. If the actual cost of a contractor was wildly different to the true total cost of employing a permie, we'd all be out of work.

So close, but no banana. Take an annual salary and divide it by 100, that is the equivalent hourly rate.

[contraspirer]

Apologies Malvolio. I am still confused.

What i understand from your reply is that contractors need to be duely compensated for all the trouble they go through, not to mention the lack of security and persistent uncertainty about the future.

Thats precisely the reason i was surprised when my Permie take home income calculation was almost equal to the Contract take home income figure in the chart.

Also the last sentence of your post is adding to my confusion. If i consider 50,000 as annual income and divide by 100 i get 500!. That surely cant be the hourly rate!.

Hope you will throw some light on this!.

[The Lone Gunman]

Hi All,

I have never contracted before and all my previous work ex has been in permanent roles.

But lately going through jobsites like Jobserve,etc i found that Contract roles pay way too much than permanent roles and deserved due attention!.

After googling a bit i came across this wonderful site and then eventually this wonderful post by SJD. The comparison chart for Own Ltd Co, Umberalla and Composite was very helpful.

But to take a final decision i needed a comparison with take home figures in Permanent roles. Googling more didnt help, so I just visited some gov.uk websites and checked up on the basic income tax calculations(the slabs et al) and NIC calculations(97 to 645 , 11% etc) . A basic calculation using 50000 p.a. as gross income gave me the following figures.

Gross Income £50,000 p.a.
Income tax £11,733 p.a.
NIC £3,134 p.a.
Net Income £35,133

Income for 3 years 35, 133 * 3 = £105,399 p.a.

If i compare this figure with the chart mentioned earlier. I dont see too much gain in contracting , in fact, with the Umbrella and Composite option it wouldnt make sense to contract at all!(if the decision to contract is based solely on financial gain of course)!.



Am i missing out on something here? Have my calculatioins gone awefully wrong ? Whatever the case, please enlighten me and help me make a informed choice.

Cheers!

A 50K a year permie post would not pay 50K for the contract, more like 90K. Generally hourly rate works out as Salary/1000 (not 100 as Malvolio says). I like to calculate at 40 hours per week and 45 weeks per year.

<edited due to blind acceptance of Malvolio getting it wrong>

[malvolio]

Oops, LG is quite right, dropped a zero. Blame the heat, there's no air con in the home office...

If you're on £50k as a permie you need £50 an hour as a freelance to break even; then after all the fixed overheads and allowing for all the extra unpaid time you'll suffer, not unnaturally you come out roughly even.

Or in other words, the financial difference ain't that big any more, all things considered, for the better paid roles. You need a better reason to go freelance these days.

[contraspirer]

Hi Malvolio and LG,

Thanx a bunch for the clarification.

Cheers!

[cojak]

Of course nothing can beat the feeling when you reply "you pay me £XXX per day to give you my opinion/recommendation on best practice. If you don't like it fine - so fire me..." to a tetchy (permie) Project Manager.



No permie delusion that my job is actually permanent...

[Newby]

Picture of the sticky writer

You can view a picture of the man with the stickiest thread on rival contractor site Shout99. He is now one of the experts on the site.

You certainly dont have much competition in the looks department from the man above you!!!

nice pic

[simondolan]

You can view a picture of the man with the stickiest thread on rival contractor site Shout99. He is now one of the experts on the site.

You certainly dont have much competition in the looks department from the man above you!!!

nice pic

I can supply any number of signed 10x8 pics for the ridiculously low price of only £9.95 each.

Emails to usual address.........