I'm soon to be starting a new role as a contractor. Currently I'm working for an agency and I'm PAYE, but chatting to the new agency for the new role and they wanted to know whether I'd be working as a limited contractor or if I was going to do it as PAYE (I am going to start as PAYE, but they said I can switch at any point).
I've never been self employed and always been PAYE, but I'm seriously considering it.
What are the pros and cons of contracting through your own limited company?
A lot more hassle but worth it in terms of how much you can now claim as "costs". So things like mobile phone, fuel, your car, etc etc. All these things, you'll be currently paying out of your after tax earnings will now be paid for before tax. If you're crap with accounts, get yourself an accountant. Keep good records and he/she will save you more than what he/she will charge.
It was mainly the extra travel costs that are making me consider it. I will have a 50 mile round trip 5 days a week.
There are others here that will be able to advise on how much you can claim for "commuting" costs though. I'm not entirely sure what is and isn't allowed for travelling over and back to the same place of work every day.
Basically you will take home lots more ££££ in a ltd. Get a good accountant and they will make the process pretty easy + their fees can be charged to your company.
Check out the ContractorUK site, lots of guides on there about Ltd vs PAYE etc. Beware the forum, they like you to have done your research first before asking basic questions 😉
You can claim travelling expenses no matter if you are PAYE or LTD, I'll be doing it this year and I'm now a staffie (based at a clients office). Current rules say you can only do this for two years though, after which it becomes your place of work.
As for whether you should be PAYE or LTD, that depends on how you feel about Tax avoidance/evasion. I was always happy to pay tax on all my earnings so I was PAYE. It was also a lot simpler and I'm inherently lazy with this sort of thing.
There are so many contractors here that you can get some good basic advice but tbh, just go and see an accountant - there's no question stupid enough for them - they'll have heard it all before.
Oh, did I mention?
Get an accountant.
It'll save you a lot in tax and the benefits of claiming mileage and other expenses are good too. How long is the contract likely to be for? If it's fairly short term there are some companies (I used one called Boss) that will run the ltd company for you. All you have to do is complete timesheets and expenses forms every week and they do the rest. It's definitely worth doing.
If you do go LTD then swot up on IR35 and make sure your situation regarding it is clear (or as clear as it can be).
I can only second what you've been warned about IR35. Mr taxman tends to assume anyone working for an agency is a tax cheat by default, and you can expect a lot of probing questions.
Since you'll be covered under changes implemented by the Agency Workers Directive next week I'd go PAYE.
no need to be limited .. register withe agency as self employed they ll tell you the stuff you need
you 'wages will be paid to the agency who pass them to another business who ll deduct 20% for hmrc then give you the surplus you keep your resonable expences reciepts.. anything that you had to pay to get to and do your work, clothing fuel phone bills tools etc etc at the end of the year give that to an accountant pplus say 300 quid and hey job done you ll almost certainly get money back from the 20% you have taken off you
its simple only fools do paye and being self emplyed they ll pay you more per hour.. how hard a decsion was that..
thanks for the advice.
As totalshell said
Get your wages paid to an immediatery and get them to pay you, you do nothing they keep a small fee and tax wise you are much better off, lots of it is going through loopholes and some methods they use can be questionable but not illegal.
Choice is yours