Contracting (LTD) vs. PAYE

[mikeh]

IR35 concerns aside, I have a curiosity.

If you were given the option between;

PAYE employment, all the perks, £45k a year.

Contracting (LTD) for the same gross amount of £45k a year, with the same sick/holiday terms as the PAYE option.

What sort of difference could you expect in take home pay?

[stek]

Eh?

[GazCol]

IR35 concerns aside, I have a curiosity.

If you were given the option between;

PAYE employment, all the perks, £45k a year.

Contracting (LTD) for the same gross amount of £45k a year, with the same sick/holiday terms as the PAYE option.

What sort of difference could you expect in take home pay?

45k a year contracting, with holidays/sick pay thrown in (let's ignore IR35) is £172 a day gross. This isn’t a question but a sanity check, isn’t it?

[TheCyclingProgrammer]

If my rate or work pipeline was so bad that all I could manage to turnover in a year contracting is £45k then yes, I'd get a permie job.

[LisaContractorUmbrella]

I assume you mean that you are ignoring IR35 and are comparing £45k a year as company income versus £45k a year in permanent employment??? You are also are ignoring the fact that working as a Director of your own Ltd Co assures you no rights to holiday pay, sick pay etc so any calculation would be meaningless??

Why

[Martin at NixonWilliams]

IR35 concerns aside, I have a curiosity.

If you were given the option between;

PAYE employment, all the perks, £45k a year.

Contracting (LTD) for the same gross amount of £45k a year, with the same sick/holiday terms as the PAYE option.

What sort of difference could you expect in take home pay?

Assuming outside IR35 and a £10,000 salary, no other expenses and ignoring VAT etc. the take home pay would be roughly £38,000 (Ltd) vs. £33,242 (permanent).

I'd be very surprised if a contractor were to ever receive an offer like this. Firstly, the salary would attract £5,112 employers NI costs so the salary would be more expensive than the contractor and secondly, a contractor will generally always be offered much more than a permanent employee would. It isn't just about sick pay and holiday pay (which you would not get as a director of a Ltd anyway), it is about job security. The main reason contractors are paid a premium is because they risk being put out of work at any point - without compensation.

I hope this helps.

Martin

[northernladuk]

Similar questions have been asked in the past so maybe do a bit of research and then come and put in a better question?

Search is here. It's just a quick shot using 'LTD or PAYE' so try varying the search terms.

https://www.google.co.uk/search?q=LT...ss&safe=active