Thanks all - that has given me some clarity. A vital piece of info that I forgot to disclose is that I am an accountant. However, I'm a commercial accountant and haven't touched personal taxes since I was a trainee a good decade ago, although it's something I could turn my hand to if I got my old textbooks out.
My agency does allow me to use a limited company on my existing contract inside IR35 but it sounds as if that is rare and may not be the case on my next contract.
I think you've helped me make my mind up to stick with the umbrella for now - primarily on the basis that my next contract is unlikely to allow the use of a limited company inside IR35 so it's not worth going through the learning curve of setting up the limited for now.
Thanks for your help.
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Previously on "£1k pa saving from using a Limited Company inside IR35?"
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Originally posted by KaiProctor View PostHi,
I have been contracting inside IR35 for a while now. I pay an umbrella company £100 per month for their services (£1200 pa). I was considering going down the limited company route on the basis that I will save approx £1k per annum (£1200 of umbrella fees - £200 of limited company fees).
I was working on the assumption that there would be approx £200 per annum of fees associated with running a limited company:
- company registration fee
- business bank account (is this a must or can I use my personal account?)
- have I missed any fees for running your own limited co?
Would appreciate if someone can confirm whether I have done my calculations correctly i.e. that I will save c. £1k pa by moving to a limited company.
Thanks.
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Have you asked if they will allow this. Many won't as it leaves the agency open to risk.
I wouldn't even bother doing the calcs. One grand just to be able to sit back and watch 10s of K come in without having to life a finger? Cheap as chips.
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No, your calculations are wrong, because you will need an accountant and an accountant charges roughly the same as an umbrella.
No, you cannot use a personal bank account.
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Originally posted by KaiProctor View PostHi,
I have been contracting inside IR35 for a while now. I pay an umbrella company £100 per month for their services (£1200 pa). I was considering going down the limited company route on the basis that I will save approx £1k per annum (£1200 of umbrella fees - £200 of limited company fees).
I was working on the assumption that there would be approx £200 per annum of fees associated with running a limited company:
- company registration fee
- business bank account (is this a must or can I use my personal account?)
- have I missed any fees for running your own limited co?
Would appreciate if someone can confirm whether I have done my calculations correctly i.e. that I will save c. £1k pa by moving to a limited company.
Thanks.
2) Equally if you can find an agency that will work with inside IR35 contracts and your own limited company I would be seriously surprised as most agencies aren't in a position to do the appropriate calculations to deduct the appropriate deemed tax payments.
3) The umbrella fee is £100 a month before tax is deducted - when you are comparing umbrella companies the actual difference between umbrella fees on you end pay pocket is probably £20 a month at most (which you can make up in say discounts on shopping / gift cards).
4) Finally even after points 2 and 3, a good umbrella company should be able to offer salary sacrifice into a pension scheme (you can't do that with deemed payments from agencies). If you throw a bit into the pension it's easy to get a situation where for every £1000 - £500 arrives in your pocket, £165 goes into the pension and only £335 or so goes in tax.Last edited by eek; 8 November 2020, 15:08.
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£1k pa saving from using a Limited Company inside IR35?
Hi,
I have been contracting inside IR35 for a while now. I pay an umbrella company £100 per month for their services (£1200 pa). I was considering going down the limited company route on the basis that I will save approx £1k per annum (£1200 of umbrella fees - £200 of limited company fees).
I was working on the assumption that there would be approx £200 per annum of fees associated with running a limited company:
- company registration fee
- business bank account (is this a must or can I use my personal account?)
- have I missed any fees for running your own limited co?
Would appreciate if someone can confirm whether I have done my calculations correctly i.e. that I will save c. £1k pa by moving to a limited company.
Thanks.
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