Do I really need to register for PAYE as an IT Consultant in my own Limited company? Do I really need to register for PAYE as an IT Consultant in my own Limited company?
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  1. #1

    Nervous Newbie


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    Default Do I really need to register for PAYE as an IT Consultant in my own Limited company?

    I just quit my full-time employment, formed a Limited company and started working directly with a client as a (what I believe to be) self-employed freelance IT consultant. I have just invoiced them for my first week's worked hours and soon expect my company to receive the payment.

    I have been researching a lot about IR35 and what I can safely say is that I can prove and pass all the criteria to place me outside of it.
    However, there don't seem to be conclusive resources to suggest whether I need to register as an employer and employee in PAYE. I know how that route can go - with a salary and the rest in dividends - but as far as I'm aware, it isn't a requirement unless I want to add more people to the company. I'd prefer to keep it simpler if I don't have to register as an employer.

    My question is - can I operate as a self-employed IT contractor working through my Limited company, without registering as an employer and employee, considering I am legitimately and easily outside of IR35 legislation?

    PS: I do not have an accountant, because especially if I don't have to register with PAYE, the complexity of the business accounting activities is low enough that I'm happy to handle that myself with FreeAgent.

  2. #2

    Fingers like lightning


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    I’d suggest getting an accountant to ask these questions to and do it all for you.

    At least for a year it two.

    I’ve seen many confident and competent people screw up their “simple” accounts.

    Lots of people successfully DIY but usually after being with an accountant for a while.

  3. #3

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    Quote Originally Posted by rootfox View Post
    I just quit my full-time employment, formed a Limited company and started working directly with a client as a (what I believe to be) self-employed freelance IT consultant. I have just invoiced them for my first week's worked hours and soon expect my company to receive the payment.

    I have been researching a lot about IR35 and what I can safely say is that I can prove and pass all the criteria to place me outside of it.
    However, there don't seem to be conclusive resources to suggest whether I need to register as an employer and employee in PAYE. I know how that route can go - with a salary and the rest in dividends - but as far as I'm aware, it isn't a requirement unless I want to add more people to the company. I'd prefer to keep it simpler if I don't have to register as an employer.

    My question is - can I operate as a self-employed IT contractor working through my Limited company, without registering as an employer and employee, considering I am legitimately and easily outside of IR35 legislation?

    PS: I do not have an accountant, because especially if I don't have to register with PAYE, the complexity of the business accounting activities is low enough that I'm happy to handle that myself with FreeAgent.
    You don't have to but there are advantages to doing so. It's nothing to do with IR35.

    If you run PAYE you can pay yourself a minimal salary and qualify for NI contributions at no extra cot to you or the Ltd. That salary is effectively tax free and means you can take extra from the company without it all being hit by the dividend tax.

    Even with simple accounts it worth getting an accountant at least for the first year or two while you learn the ropes and the pitfalls to look out for.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  4. #4

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    Echo what the others said.

    As to the specific question, if you are going to be tax efficient, you need to pay yourself a salary of just over £8K a year. If you don't do that, you are paying extra Corporation Tax, around £1600 / year.

    If you pay yourself a salary, you save that £1600 / year, but you also have to register for PAYE.

    Registering for PAYE will probably take you less than an hour, certainly less than 2 hours. The hassle of operating payroll, filing RTI and paying yourself the salary, might cost you 5 minutes a month. If that really bugs you, you could just pay a salary once a year, at the end of your tax year, and just use dividends the rest of the time. So you will spend between 5 and 60 minutes on operating payroll and between 30 and 120 minutes on registering for PAYE and setting it up in Free Agent.

    So, £1600 for at worst three hours work.

    Or, you can pay yourself a salary without registering for PAYE, and wait until they find you. Then, you'll register for PAYE anyway but will have a really, really nice fine for the privilege of having waited.

    The very fact that you asked this question without knowing the answer demonstrates how badly you need an accountant when starting out. Just don't even try it. There's too many pitfalls. I'd flatter myself that I know more than most and I'd never think of dropping my accountant. Never.

  5. #5

    My post count is Majestic

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    I have been researching a lot about IR35 and what I can safely say is that I can prove and pass all the criteria to place me outside of it .
    That's what they all say.

    PS: I do not have an accountant, because especially if I don't have to register with PAYE, the complexity of the business accounting activities is low enough that I'm happy to handle that myself with FreeAgent
    That's also what they all say.

    So all of a sudden you are a tax specialist and an accountant when us if 10 years plus still default to the specialists? Yeah right. You see applying a startling lack of diligence and, as it always does, it will comeback and bite you. You see saving peanuts in the long run but leaving yourself open to massive risk.

    You make no mention at all of the fact you won't get the choice to say if you are outside in a month's time for a start.

    How come if you are a tax and accounts master you can't set a basic contractor LTD up which us very well documented on the web. I would have thought expert businessman would have been one of your skills as well.

    I've met a couple of people like you in the real world and they thought they knew it all but spent an inordinate amount of time trying to sort stuff out and asking for help.

    Do it properly.
    Last edited by northernladuk; 5th October 2019 at 09:40.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  6. #6

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    Thank you Dave, MrButton and WordIsBond, I understand that I'd practically have to go with PAYE for multiple reasons even though it's not technically required. Especially WordIsBond's answer was useful to see a tax efficiency specific that I wouldn't know if I was doing it myself.

    It was also very useful to have your opinions that even for this simpler use company, there should be enough intricacies to warrant getting an accountant.

    I'll be reviewing the Contractor recommendations topic, as even though the one I got some good advice from - Maslins - was very helpful, I imagine I can get better than £120 a month (FA included).

  7. #7

    Fingers like lightning


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    All threads should be like this! Do I really need to register for PAYE as an IT Consultant in my own Limited company?

  8. #8

    Should post faster


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    Quote Originally Posted by MrButton View Post
    All threads should be like this! Do I really need to register for PAYE as an IT Consultant in my own Limited company?
    There's nothing good about this thread.

  9. #9

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    Quote Originally Posted by genius View Post
    There's nothing good about this thread.
    Somebody said thank you to him. Let him enjoy it.

  10. #10

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    Quote Originally Posted by rootfox View Post
    I'll be reviewing the Contractor recommendations topic, as even though the one I got some good advice from - Maslins - was very helpful, I imagine I can get better than £120 a month (FA included).
    Yes, you might get a good accountant for £20 / month less. You might also get a dud. I always wondered why contractors who make somewhere between £400-1000 / day would quibble about a difference of £20-50 / month in fees for a good professional service. Seems to me if you find someone you know is good, you pay him and get on with it.

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