PAYE / LTD / Umbrella?

**MarkOD** · 20 April 2009, 11:18

The higher daily rate takes in to consideration you'd have an extra NI, employers, to pay where as normally the agency would pay this hence the lower rate

an umbrella company gives you the vehcile of a LTD to get paid without the hassle of doing all your own invoicing, hiring an accountant, looking at IR35, insurances etc

However some people don't see it as a hassle at all where as some do. Lots of people suggest an Umbrella company for your first contract while you find your feet and think if contracting is for you long term

HTH

**Sausage Surprise** · 20 April 2009, 11:36

Originally posted by MarkOD View Post

The higher daily rate takes in to consideration you'd have an extra NI, employers, to pay where as normally the agency would pay this hence the lower rate

an umbrella company gives you the vehcile of a LTD to get paid without the hassle of doing all your own invoicing, hiring an accountant, looking at IR35, insurances etc

However some people don't see it as a hassle at all where as some do. Lots of people suggest an Umbrella company for your first contract while you find your feet and think if contracting is for you long term

HTH

No it doesn't - forming a LTD company gives you the vehicle of a Ltd.
Umbrella is PAYE + E/R's NI.

Edit: the first bit is incorrect too..

I suggest the OP reads the first timer stuff.

**Brussels Slumdog** · 20 April 2009, 11:37

[QUOTE=Aaron;821143]I got made redundant from my last IT job of 12 years so this is the first big step into the contracting world.

I have been offered PAYE £210 p/d or Ltd £235 p/d. I am guessing I need to set up my own company for the £235 or get paid direct from them for £210?

Money wise-It does not seem feasible to go Ltd or umbrella for £25 extra a day unless you are working away from home and have travel expenses.

Umbrella = Employers UIF+ Management fee ( approx £35 week)

Get a quote from an umbrella company and compare with regular PAYE net pay. There are a few tax calculators on the web.

**MarkOD** · 20 April 2009, 12:05

yes but it still gives you the vehcile of a LTD in order to get the higher hourly rate, that's my point

**EchoSierra** · 20 April 2009, 13:20

Originally posted by MarkOD View Post

yes but it still gives you the vehcile of a LTD in order to get the higher hourly rate, that's my point

I know what you're saying but there are key differences between Umbrella and Ltd.

The options are:
£235 p/d LTD
£235 p/d UMBRELLA
£210 p/d CLIENT PAYE

Umbrella you won't need to set up a company but will be paying £35-£50/week for services.
Ltd Co requires company set up but may work out cheaper in the long run.

As Sausage Surprise said some of the first timer stuff (http://www.contractoruk.com/first_ti...ny_set_up.html) would be worth a read.

**Alan @ BroomeAffinity** · 20 April 2009, 14:57

I would suggest you speak to accountant. However, it might not be a balanced view as they would normally suggest the limited company route because that is their business. That said, there are often compelling reasons for using your own Ltd.

**PayMatters** · 20 April 2009, 19:26

The difference in the rates offered is because if the company pays you through PAYE they have the additional cost of employers NIC whereas is they pay you by another method then this cost is borne by someone else.

With the Umbrella example the Umbrella COmpany has to pay Employers NIC on what they pay you so this will be knocked off in calculating your "commission". A benefit of the Umbrella option over PAYE through the agency is that you may be able to receive part as a reimbursement of expenses and hence outside the scope of PAYE and NIC's.

As someone says above the solution is to get some take home illustrations done and compare your net pay figures but beware some Umbrella's quote based on expenses you may not be incurring to boost your net pay figure.

**Brussels Slumdog** · 20 April 2009, 19:39

As someone says above the solution is to get some take home illustrations done and compare your net pay figures but beware some Umbrella's quote based on expenses you may not be incurring to boost your net pay figure.[/QUOTE]

I agree -Make sure you tell the Umbrella company to quote based on your
travel cost estimation ie 5 nights Glascow £500+ return fare £150, not their
sales pitch figures. Start of with travel costs over the tax limit to test their
knowledge of what you can claim per day.

**LisaContractorUmbrella** · 21 April 2009, 08:59

It is certainly a good idea to check out the levels of service you will receive from an umbrella company but the only difference between quotes will be the fees that the umbrella company charges. All umbrella companies make payments through PAYE and can only allow those expenses that are permitted by HMR&C so, if you give an umbrella company your rate and expenses, the figure should be identical other than the fee element.

PAYE / LTD / Umbrella?