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Public sector.... switch to umbrella, really?

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    #21
    Originally posted by lucycontractorumbrella View Post
    Believe me, I am getting calls left, right and centre where contractors are "just hearing about this", and many that have not even considered that the work in March will need to be paid before 6th April. I know sometimes brollies are not overly popular, but as HMRC squeeze more and more people under employment taxes it is an option to consider. I am seeing more and more opting for the pensions route, so they can gain some tax saving.
    Could you write a quick note explaining how pensions work with umbrellas Lucy?

    I'll make it a sticky if you do.
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
    - Voltaire/Benjamin Franklin/Anne Frank...

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      #22
      From a conversation with Lucy regarding just that - I',m posting it here because of question 2

      1)Am I correct in saying Salary Sacrifice is always better than trying to reclaim pension contributions via self assessment due to National Insurance.

      1. yes salary sacrifice is the best way to do it, as putting it through self-assessment will only see the income tax benefit I believe.

      2) Were I to use an umbrella for 3 months and wanted to sacrifice my entire salary into my pension is that achievable....


      2. No, we have to ensure that the contractor stays above NMW, so they would have to receive NMW after deductions (ie Employers NI, pension, and our margin), the rest could then be put in a pension up to the maximum amounts for the year (which I think currently stands at £40k for the year).
      merely at clientco for the entertainment

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        #23
        Originally posted by likewise View Post
        local. Ive been looking into it and out of a weekly earning of £1100, various umbrella companies are offering me take home pay of between £680 and £730
        With a reputable brolly you're typically looking at 60-65% take home net.

        60% x £1100 = £660
        65% x £1100 = £715

        Since April 2016 'no' expenses are tax deductible through a brolly - any travel/accommodation/subsistence etc. must now come out of your own pocket. Ouch.
        If the gig's 'on your doorstep' all well an' good, long distance contracts are now not so attractive.

        e.g.
        Assuming another public sector contract comes up 150 miles away and outside London, you might have the following weekly expenses:
        Petrol Mon morning to site: £20
        Petrol Fri back home from site: £20
        4 nights premier inn: £200
        Petrol to/from hotel and site: £10
        Food: £30

        Total
        £280

        That reduces a £660/week down to £380.

        FYI: The UK minimum wage is £7.50/hour - a 40 hour week on minimum wage brings in approx £283 net.

        Comment


          #24
          Originally posted by SunnyInHades View Post
          Since April 2016 'no' expenses are tax deductible through a brolly - any travel/accommodation/subsistence etc. must now come out of your own pocket. Ouch.
          If the gig's 'on your doorstep' all well an' good, long distance contracts are now not so attractive.
          Just worth mentioning that although the non-chargeable expenses (ie the ones that were previously used for tax relief purposes) are no longer allowable at source via the umbrella, we can still process chargeable expenses (ie the ones the client will agree to reimburse in full). These will go through on the invoice, with no tax applied when they are paid back to you with your salary, so if there are any chargeables that you can agree with the client, then don't forget we can still process these.

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            #25
            example?

            Originally posted by eek View Post
            From a conversation with Lucy regarding just that - I',m posting it here because of question 2

            1)Am I correct in saying Salary Sacrifice is always better than trying to reclaim pension contributions via self assessment due to National Insurance.

            1. yes salary sacrifice is the best way to do it, as putting it through self-assessment will only see the income tax benefit I believe.

            2) Were I to use an umbrella for 3 months and wanted to sacrifice my entire salary into my pension is that achievable....


            2. No, we have to ensure that the contractor stays above NMW, so they would have to receive NMW after deductions (ie Employers NI, pension, and our margin), the rest could then be put in a pension up to the maximum amounts for the year (which I think currently stands at £40k for the year).
            Regarding point 2, anyone able to give an example? I had this bright idea that I could switch to a brolly (due to working for a public client), then 100% salary sacrifice and then have my limited company (plenty of retained profits) pay me a small salary (whatever the tax free allowance is changing to) and any divs (only if tax efficient) to live on. No idea if this is allowed but sounds good to me

            I'm guessing it still kind of works without the 100% salary sacrifice as I'd be able to put £40k worth as salary sacrifice through the brolly but as the NMW accounts for approx £14k already then I may not get as much benefit from extracting the limited company money. I'm reading the above that you still get the tax benefits from putting as much pension as you can away whilst still leaving enough for the NMW and the tax and NIs etc is only on the smaller amount.

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              #26
              Originally posted by mashetti View Post
              Regarding point 2, anyone able to give an example? I had this bright idea that I could switch to a brolly (due to working for a public client), then 100% salary sacrifice and then have my limited company (plenty of retained profits) pay me a small salary (whatever the tax free allowance is changing to) and any divs (only if tax efficient) to live on. No idea if this is allowed but sounds good to me

              I'm guessing it still kind of works without the 100% salary sacrifice as I'd be able to put £40k worth as salary sacrifice through the brolly but as the NMW accounts for approx £14k already then I may not get as much benefit from extracting the limited company money. I'm reading the above that you still get the tax benefits from putting as much pension as you can away whilst still leaving enough for the NMW and the tax and NIs etc is only on the smaller amount.
              My very rough estimate is that the national living wage (£7.50 an hour from April) would take £299 a week from your pay packet and there would be enough £30 or so deducted for umbrella fees. That probably is slight on the high side as the calculation was (£7.50*35*1.139) of which 13.4% is employers NI and 0.5% the apprenticeship allowance....

              Hence you could throw everything bar £329 a week into a pension....
              Last edited by eek; 28 February 2017, 22:29.
              merely at clientco for the entertainment

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                #27
                Originally posted by northernladuk View Post
                It's starting!!!! Hold on everyone....
                Yes indeed. These are just the early rumblings!

                Comment


                  #28
                  Originally posted by LondonManc View Post
                  Have a look at this:
                  http://forums.contractoruk.com/umbre...ey-differ.html

                  Lucy from Contractor Umbrella explains the reasoning behind it.

                  Going perm sounds best for you.
                  If you are prepared to put up with all the rubbish that this entails then I agree, going perm does sound like your best option.

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