Employment Status

Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.

Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.

Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.

The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]

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Quick Guide to Contractor Limited Company

60 Second Guide to Limited Company Contracting

If only there was a way to trade as a contractor that was 100% positive - sadly, we're in the real world.

To get the maximum net income from your gross invoice value, trading through your own limited company is usually the best option, especailly if you are going to be contracting for most of your career.

Overview

Your own private limited company will enable you to develop tax planning strategies with your contractor accountant. On the other hand, running your own limited company means you will put yourself in the public domain (directors and shareholders have to be made available in the public domain).

A limited company is an autonomous legal entity in its own right. Any debts, problems or liabilities of the limited company remain within the limited company. Directors and shareholders are not in the firing line for any of these debts - houses, personal wealth and other assets are not at risk.

Potential Downsides

Though the contractor is not risking any personal loss if the company experiences troubled times, there are some areas that need careful consideration.

  1. The limited company has to pay Corporation Tax on its profits. The balance left, which is called retained profit, can then be paid out to shareholders. However, the shareholder will have to pay tax on dividend pay-outs.
  2. To set-up a limited company you need to follow predetermined procedures, as laid down by current legislation. There is a cost and you will have to fill in a number of forms - paperwork is not to everyone's taste.
  3. On-going professional costs are unavoidable. You will have to engage a specialist contractor accountant. The services and costs vary quite a bit, as in any market place, and as a new contractor you will have a lot on your plate already.

Often the deciding factor on whether you opt to trade via a limited company, or chose the easier route of using the services of an umbrella company, comes down to your hourly/daily rate.

You should speak to a contractor accountant who will be able to run you through the options and give you their advice as to which option is best for you.

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HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.