Umbrella inside IR35 Vs Agency PAYE?

[nhsanalyst]

Hi,

Have tried searching for this on here but not exactly sure of what it might come under. Have also read the 'Working in the public sector? An FAQ about IR35' thread. My last contract in the NHS was outside IR35 and I have a likely upcoming NHS opportunity which unfortunately will be inside IR35. I'm confused as the agency has advised me of two different rates; £380 under an umbrella and £334 under PAYE (I am presuming this option is where they sort NI payments as well and then just pay me direct). My questions:

1) I am guessing the £46 p/m difference is the cost the agency is taking to run things on their side? Is there any benefit to going with an umbrella in such a case, given they are roughly twice the cost as a month? I know some have other benefits (eg pension, etc). Just want to make sure I am not missing anything here with this
2) I asked my current accountancy firm about potential cost projections; they advised that I could still run my LTD company under IR35 with my income in the form of deemed payments. Is this a realistic option given the other two available? I am guessing I'll likely be forced to take one of the other two options but I'd like to understand all my options

If anyone can anyone advise, or point me to a resource, that would explain either of the above that would be appreciated!

Thanks

[northernladuk]

Yes the difference is rate is for the agent to handle PAYE. You will get charged by an umbrella so you need to find out how much they charge and factor that in.

One benefit you might consider is that the right umbrella will allow you to pay in to a pension if you opt in to one from the off. This will obviously reduce your take home but the money is pre tax so you are reducing your overall tax bill. I believe some people are putting the max in and only paying the minimum tax. I assume they've got a big war chest or low outgoings so don't need cash from the gig.

Not all umbrellas will allow full payments to pensions though. Some will only accept like 6% or something. Give Contractor Umbrella a ring. They allow any payments to the pension so if that's an option you can live with they can help.

[northernladuk]

If you type the following in to google you'll find all the threads related to your question.

umbrella paye site:forums.contractoruk.com/public-sector-ir35/

[eek]

Yes the difference is rate is for the agent to handle PAYE. You will get charged by an umbrella so you need to find out how much they charge and factor that in.

One benefit you might consider is that the right umbrella will allow you to pay in to a pension if you opt in to one from the off. This will obviously reduce your take home but the money is pre tax so you are reducing your overall tax bill. I believe some people are putting the max in and only paying the minimum tax. I assume they've got a big war chest or low outgoings so don't need cash from the gig.

Not all umbrellas will allow full payments to pensions though. Some will only accept like 6% or something. Give Contractor Umbrella a ring. They allow any payments to the pension so if that's an option you can live with they can help.

To be clear the difference in rate is Employers NI which will be deducted by the umbrella anyway.... The choice really boils down to pensions as NLUK states above - if you want to put a lot into a pension its best to do so via salary sacrifice which only some umbrella's do - if you want the cash and don't want put a lot into a pension use the agency. Also its worth stating that an umbrella has to pay you the living wage. Once you have received the living wage everything after tax and the umbrella fee can in theory go into your pension.

Finally, while it may look like we recommend Contractor Umbrella a lot its actually because they are just good at what they do and I can't remember seeing a single complaint about them....

[northernladuk]

Finally, while it may look like we recommend Contractor Umbrella a lot its actually because they are just good at what they do and I can't remember seeing a single complaint about them....

indeed. There is the added bonus the MD posts on here and to be fair I've not heard anything but complaints about many of the others as well so CU are a pretty solid recommendation as things go.

[northernladuk]

Oh, and yes you could do it through your LTD but you'll be hard pressed to find an agent that would allow it.

[eek]

Oh, and yes you could do it through your LTD but you'll be hard pressed to find an agent that would allow it.

You really can't not many agencies are set up to cope with what is required and you don't get any benefit from doing so as the limited company will only receive the money post deductions (i.e. the same amount the agency would pay you directly). So all it does is give everyone additional hassle for zero benefit...

As I stated ages ago the options really are:-

agency - if you don't want to pay much into a pension
umbrella - if you want and can pay a lot into a pension...

[TheFaQQer]

I'm confused as the agency has advised me of two different rates; £380 under an umbrella and £334 under PAYE (I am presuming this option is where they sort NI payments as well and then just pay me direct).

Are they quoting gross day rate or net rate to you? I suspect the former but they may be suggesting that your take home via the agency is £334.

1) I am guessing the £46 p/m difference is the cost the agency is taking to run things on their side? Is there any benefit to going with an umbrella in such a case, given they are roughly twice the cost as a month? I know some have other benefits (eg pension, etc). Just want to make sure I am not missing anything here with this

Since you're aware of the pension suggestion, then I can't think of any other advantages of going via an umbrella. Using an umbrella will add another company in the chain who can disappear with your money, so if you're not fussed about the pension contribution (and you may be able to make additional contributions via the agency anyway) then I would look to reduce that risk if possible.

2) I asked my current accountancy firm about potential cost projections; they advised that I could still run my LTD company under IR35 with my income in the form of deemed payments. Is this a realistic option given the other two available? I am guessing I'll likely be forced to take one of the other two options but I'd like to understand all my options

You'd need the agency to agree to making the deductions and then paying your limited company the net value. It's possible, and some of the larger agencies will be doing that.

Good luck with whatever you decide to do And welcome

[lucyclarityumbrella]

I'm confused as the agency has advised me of two different rates; £380 under an umbrella and £334 under PAYE (I am presuming this option is where they sort NI payments as well and then just pay me direct).

Hi as everyone has said the difference is the Employers NI and Apprenticeship Levy that the contract rate has to cover if you opt to go via an umbrella. I have ran a few calculations with the rates you gave...
Agency PAYE, nets you £1118.22 assuming standard tax codes etc, but may not give you any employment rights or access to a pension.
Umbrella, again on standard tax code, nets you £1109.77, but gives you full employment status and with ourselves full access to a pension scheme which is the only legitimate way to make any tax savings (oh and childcare vouchers if applicable).

If you do want to know anymore about brolly, then please do shout

[nhsanalyst]

Thanks for the warm welcome - appreciate all your thoughts/advice!

In response to some of the points raised/questions asked:

Not all umbrellas will allow full payments to pensions though. Some will only accept like 6% or something. Give Contractor Umbrella a ring. They allow any payments to the pension so if that's an option you can live with they can help.

thats good to know!

Are they quoting gross day rate or net rate to you? I suspect the former but they may be suggesting that your take home via the agency is £334.

gross day rate

Hi as everyone has said the difference is the Employers NI and Apprenticeship Levy that the contract rate has to cover if you opt to go via an umbrella. I have ran a few calculations with the rates you gave...
Agency PAYE, nets you £1118.22 assuming standard tax codes etc, but may not give you any employment rights or access to a pension.
Umbrella, again on standard tax code, nets you £1109.77, but gives you full employment status and with ourselves full access to a pension scheme which is the only legitimate way to make any tax savings (oh and childcare vouchers if applicable).

If you do want to know anymore about brolly, then please do shout

Appreciate the income projection. I presume the agency might have a PSL but as and when I know more I'll get back in touch