This week I've been offered a new position. Its a contract role for a set period of time.
I've been offered that I can either be PAYE through an agency, or I can contract through my own Ltd company.
Mrs B contracts through our Ltd company already so I've no issues with setting up / complexity (I do all the accounts / returns etc) but I'm aware the world has changed and it might no longer be the best way to operate.
Agency have advised I would receive holiday pay and token pension scheme so I need to get my spreadsheet out, but has anyone any recent experience / comments covering pros and cons either way?
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I'm reasonably up to date with contract world and I would have thought that limited company was the way to go without question.
The tax breaks may have been diminished but they are still there. You can still pay yourself just enough salary that you pay no tax, employers or employees NI, and get the rest in dividends, which are still taxed at a lower rate than earnings. Depending on your circumstances, you can also consider other tax efficient ways of paying yourself, like having your company put the max into a pension for you which saves you corporation tax - there is an annual limit on the amount you can put in but you can use previous (3?) years allowance if not used.
There are calculators on the web which you can use to work out your take home as PAYE, and there are others which tell you what your take-home would be as a Ltd Co. Just beware that sometimes the latter are skewed by some tax saving wheeze which the provider is trying to promote.
The single major change in contracting is the new approach to IR35. It is binding on public bodies as of now, but I expect other companies will follow suit in the fullness. AIUI the onus is now on the employer to determine whether the engagement falls within IR35, and I would think that most organisations would err on the side of caution which means that many contractors in the public sector will have to either go PAYE or umbrella. But if that's not been offered to you as a choice then it's unlikely that applies in your case. (It is still worth having your contract reviewed for IR35 friendliness, a basic review used to come free with one of the insurances I had). You do need to be aware of your IR35 position as if you work outside it but strictly later are deemed to have not been eligible for that then you can get fined quite heavily as well as paying all the back tax.
If you are in any doubt or are of a nervous disposition then go PAYE but if I had the choice I'd go Ltd.
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New Job - Taxation - smokie
