@@knowhow993 Thanks for your comment! It's simply that the cost of running a limited company is relatively high. If the day rate is below £120 then the company would struggle to pay for itself. For example tax savings between a limited company and sole trader only start becoming different at about £30,000 profit. The limited company starts becoming more tax-efficient after this point even with accountancy fees factored in. Of course if you're determined to run your own business, then the limited company is a better arrangement from the beginning due to its legal separation.
I was completely unaware that most of this was even a thing until it just popped up in an email; thank you for explaining this in a clear manner.I think I have a better understanding of which applies to my current situation better
Amazing video, well explained. Much prefer the umbrella route as they secure contracts for you if you don't want to be worried about having to find your own clients. But the employer NI is something to think about!
A very informative video. Thank you very much. For a salary of £120,000 on a permanent basis after Tax and NI take home is £78,653. (Umbrella is £57,466 and Ltd is £76,948). So, in this case permanent is the best option? When do they break even?
Hello . Very informative video - thank you so much for taking the time. I would love to have a video on the comparison between umbrella companies and agency PAYE (which is my current predicament). :-)
Hey! Thanks a lot for your suggestion, I will add it to my list :) As a quick summary they should be very similar but I'd just double check with the agency's PAYE systems if it's going to be deemed payments through a Ltd company. The deemed payments through an agency work out less tax efficient and you also don't get any employee protection. In this case umbrella would be the winner.
@@JuniperLynx Thank you so much 😁. I've just started working as a locum. I will be locumming in the NHS and therefore can't have the full benefits of working as a limited company due to the IR35 regulations. I will get the agency and one of their recommended umbrella companies to give me a weekly calculation - including employee benefits - net of tax. 😀
@@mariadillon860 Ah yes that would be an issue for the company route. Get those calculations from them to check which is best. From my experience you'd have a better time with umbrella because you're technically employed by them hence the benefits! I hope it all goes well 😊
So glad to hear you setup your own company! Congratulations! Thanks for your awesome comment :) If you need any help with your accounting requirements feel free to get in touch.
@@JuniperLynx ...You kno something Juniper can i speak to you somewhere else ... I might just take you up on your offer ... My name is Kevin Mutch on facebook xxx
@@JuniperLynx After watching your video i felt externally guided to SWITCH from Umbrella over to Limited ... What a huge difference in wages ... I have been using Brookson xxx But yet again feeling externally guided ... Are you telepatic ? - if so please refrain lol lol id love to talk to you x
@@JuniperLynx You have to admit my patter is Good ... Am shattered just finished welding Duplex for 12 hours ... So are you an accountant ? ...Thank you for the reply xxx
Target small companies, start-ups etc. I read the room and did that 5 years ago. A risk, yep, but I've never been inside IR35 due to being exempt (company size).
Jacob Bannier sure thing! Glad to hear it helped :) haha haven’t heard that one before 😂 I am originally from America but live in England for some time now so I’ve mixed them somehow!
Keep the "Out" side as "out" as possible if you want to pay less tax. Go for "In" if you've got no "Out" options, or there is some kind of security included with an "In" contract, or you don't want to deal with the added paperwork of the "Out" side. I work solely in the "Out" sector, but my brother works in the "In" sector - both have merits for each of us, and neither of us would ever swap. Me: I don't want to pay a fortune in tax for my hard work and I understand the organisation, record-keeping and paperwork required. Sometimes the tax I'm paying is from earning as much as 18 months ago, so you need to have a head for figures and an ability to save (or expect to go to prison). Him: My brother would never want to deal with the complications of VAT, accountants, dividends, self-assessment, etc., etc. so he's happy just getting paid everything monthly even though he pays more tax.
Thanks for your comment! There are personal allowances and national insurance thresholds available each tax year. If these are not exceeded, then there would be no tax or NI deductions from salary. The personal allowance is £12,570 this year. The NI thresholds can be seen here: www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions Please note directors are able to utilise the annual thresholds for tax/NI purposes. I hope that helps!
So say If I have a business, and instead of registering self employed or as limited company, I go with the umbrella option. Will that still work? Only saying this as I would be employed rather self employed. Makes it much easier when getting a mortgage etc. Advise please :) Thanks.
Technically you could go umbrella, but you'll lose a lot of money that way to unnecessary deductions that you wouldn't have as a regular employee (apprenticeship levy, employer's NI etc). We've had plenty of limited company contractors successfully apply for mortgages, it just means you would need to build up accounts information and submit self-assessment tax returns for about 2-3 years to show that you have relatively stable income even though you're running your own business. It may also be worth noting that umbrella contracts are not a form of permanent employment. This may be taken into consideration by the mortgage provider. Unfortunately we cannot provide financial advice so I'd recommend speaking with a mortgage advisor to see what would give you the best chance.
I am a UK Registered Nurse and doing Agency work, I have chosen Umbrella Company from the list given by nursing agency, what should I do if I want to use limited conpany please?
Thanks for your comment! If you are working in the public sector, then the 'end client' would need to determine your IR35 status. 'Outside IR35' would be a business to business arrangement, whereas 'Inside IR35' would be considered employment. If you can find an 'outside IR35' contract then you would be able to set up a limited company and start your own business. If you can only find 'inside IR35' contracts, then there would be no benefit in opening a limited company. 'Inside IR35' contracts require you to be 'taxed like an employee' but don't necessarily include employment rights. This means that all tax and national insurance would be deducted at source (by your client or through an umbrella company). If your pay from an 'inside IR35' role is sent to your company's bank account, it would simply be treated like net pay salary and wouldn't affect the company accounts. I hope that helps!
Glad to help! Yes that's right. Normally as an employee you wouldn't even see the employer's NI so it's just 12%. However through umbrella they will deduct this from your payslip because they're simply providing an employment service.
Yep. The govt are saying: "You're not really a company so pay your PAYE and NI!" And at the *same time* they're saying: "You're a company! Pay your employers NI as well please!". So, you're a company and not a company to suit them depending on which way the wind is blowing... 🙄
If you're going through Umbrella, you'd be an employee of the umbrella company. You would pay normal tax rates plus the umbrella fees so actually you would earn less especially because you wouldn't be able to reclaim expenses. A limited company would still need to be CIS registered if you're working in that industry. You can apply for gross payment status so there are no deductions but you need a certain amount of turnover. Basically you won't pay any more or less tax from CIS deductions. The CIS employers simply deduct 20/30% up front from you/your company, then you work out what is actually due each year from your profits. Any CIS deductions are offset against the tax bill and you would normally end up overpaying. At this point the tax can be refunded from HMRC by making a claim.
You should still stay tax efficient when paying yourself from your Ltd company as the mortgage broker will look at the health of your company as well as your personal income. So even if you don't take any money from the company they'll still consider how well it's doing. Normally the broker will want a complete set of accounts (12 months of trading). They may allow you to provide provisional figures if your company hasn't been trading very long.
Really useful, thanks. Great video. Is there ever a situation where you could have both umbrella and a Ltd company? For example, if your jobs were 50% inside IR35 and 50% out? Or, is it always better to just stick with one approach?
No problem! I would say it's better to keep them separate as you'll get the most financial reward this way. For example if you were caught inside IR35 for a particular client, run that through umbrella. You should still be able to have your own limited company for private work on the side that isn't a 'disguised employment'. You can also claim all legitimate business expenses associated with your private work. The funny thing is that if you have more than 1 contract running at the same time it's almost impossible to be an employee of the other client. The public sector rules are a little bit crazy right now.
@@JuniperLynx Thanks! I heard that there's going to be some major changes to IR35 rules for contractors working in the private sector in April 2020. Does that mean it's all going to be as bad as the public sector? Would be good to get a mini video with your thoughts on the proposed changes.
Thanks for your comment! It depends on whether your customers are VAT registered and also how many VAT expenses you have. For example if you're a consultant and have minimal expenses with a client who is VAT registered, then you could register for the flat rate VAT scheme and essentially get some extra income into the business. Your fees wouldn't increase by being VAT registered since the client can just reclaim the VAT from HMRC. If you were selling products or services to individuals that are not VAT registered, then it's unlikely that VAT registration would benefit your company that much. Of course once you reach the £85k threshold then you'll need to register so it may be worth setting up your pricing in a way that makes sense when that does eventually happen :)
I work for public sector doing different roles where I find work, I have been doing it for over 6 years now. Is it worth doing limited company? My pay has gone higher and is around £200 per day...Is it worth doing limited company? Or just stick to umbrella?
The only issue with the public sector is that they tend to blanket cover everyone inside IR35, so even if you try to work through your own company you'll be worse off due to 'deemed payments' and you won't get any holiday time or employee protection like you would with umbrella. If they'll declare you outside of IR35 (working legitimately as a business, not an employee) then the Ltd option will be better financially and also give you more flexibility/control over your money. Just ensure an appropriate IR35 friendly contract is in place and you are treated as an external consultant/contractor. Check with the end client if they see you as inside or outside IR35 based on your working arrangements.
Hi Caroline, I'm currently working as an employee of an umbrella company who provide me benefits like pension, paid leave and so on. The company has a contract with the end client where I'm currently doing my project. I wish to change the relationship so that the umbrella treats me like a contract worker. This would mean that i lose out on paid leave and pension. What would be the adv and disadvantages if i do so ?
thanks for your question! I'm not sure I fully understand. Umbrella companies are there for the sole purpose of employing you and ensuring you have basic employee rights while contracting. If you wish to break away from an employment arrangement, you'd need to setup your own Ltd company and go direct with the agency for a new contract. Is this what you mean?
@@JuniperLynx Thanks for your response. Let me try to explain, the end client does not want to have contractors working as ltd company due to IR35 regulations. Currently I'm employed with the agency and work on the end client project. Would it better to terminate my employment relationship with the agency and work agency PAYE. I would lose out on my yearly paid leave, pension but i think i only need to pay a weekly fee to the agency. Is there an advantage of doing this ? There are no benefits as an employee to the agency.
@@venkatramang9221 Ok that makes sense. This means the end client thinks you are operating inside IR35. Normally what would happen is you receive 'deemed payments' into your limited company when it's an inside IR35 contract. You won't receive any benefits of being an employee but you'll get taxed the same if not more than going through an umbrella company PAYE. Other than that I'm not sure what you mean regarding agency PAYE. PAYE is the same as employment so you should still receive benefits like holiday pay and pension. Also the agency wouldn't normally employ you directly, they would however charge a fee to calculate the deemed payments into your own limited company. I hope that helps clear things up! Let me know if I misunderstood anything.
@@venkatramang9221 I'm glad I could help you! This sort of issue is currently happening in the Public Sector because of the IR35 changes. It means the end client can decide your IR35 status and they're directly liable for your tax if it turns out you were inside IR35 all along (if they deemed you were outside initially). Essentially they don't want to take on the risk so they'll just say you're inside in most cases. I wish you all the best going forward! :)
This year was my first year doing limited contracting. But I have been taking out money from my business bank account, disregarding my accountants summary pay to transfer. Does this mean that I will be penalised? Will I pay a £1000 fine? Any other repercussions? I am a little bit stressed about it
Hi there, I wasn't notified of this comment so apologies for the delay. There won't be any penalty for not taking money out from your company. It just means you may have missed out on some tax savings during that year which is why your accountant advised you to transfer some out. For example there is a £2000 dividend allowance which is tax-free regardless of other earnings. If your accounts and self-assessments are done on time then no need to worry.
I@@JuniperLynx Thanks for your reply but i didnt 'not take any money out' I took money out, above of my home in take! I just hope they don't audit me or anythign like that
MiscellTube apologies I misread your comment. In that case your accountant should have seen your business bank transactions and reported any dividend drawings to HMRC on your self assessment. If you were taking money to repay yourself for expenses there wouldn’t be any tax for you to pay. Same for salary as that’s done through PAYE each month. Did you try asking your accountant if they declared your income? If you paid tax then no problem. If not and you had extra income then you’ll need to pay any tax due plus interest.
@@Oranjee1089 If you're taking money out of a Ltd. company regularly, you'll struggle to claim that they are dividends. HMRC will deem it a salary and tax it as a salary. If it's less than £12,500 don't worry as you don't pay tax on that anyway. Anything more than £12,500 salary will be taxed at 20%. Anything above £50,270 will be taxed at 40%. Dividends: Expect to pay about 8% (the rules keep changing for the worse) on all dividends. Higher rate is about 34% and is more complicated to calculate because the rate is based on all income, not just dividends. *If you want to pay something as a dividend and pay less tax, you have to do it less often. For example, I pay myself one chunk of money every 12 months. Every 6 or 12 months is realistic. You can't take it regularly and claim it's a dividend.*
IS IT POSSIBLE TO HAVE BOTH Limited Company and limited company by working for NHS for umbrella and also have limited company by doing some hours for private throught limited company.?
Hi dear, Thanks for uploading a nice informative video. I have been offered a job as a contractor on 80 pounds per day basis and am being asked to go any umbrella company or limited company. If I go with the umbrella company how much will I get after paying taxes ,NI and umbrella company will also charge.Will there be any hidden cost or anything like I should know about?? TIA
pooja soni hey there, thanks for the comment! With umbrella you can usually ask them to provide you with a calculation of what your take home pay will be. They should also have terms and conditions that you can check through to make sure what fees they charge. Unfortunately as all umbrella companies operate with their own fees I can’t accurately say what the final amount will be :)
Hi! I have a doubt about my payslips, i think the umbrella company is wrong the discounts, i already contact then but they explanations are confused for me. Can you help with this doubts? Thank you
Hi Diana, thanks a lot for reaching out. I have limited experience with Umbrella processes as each company is different. Would it be possible to ask them for the explanation in writing? Simply email it to us at hello@juniperlynx.com and I'll have a look for you.
My friend bought a car on instalment to work for UBER taxi, what expenses can he claim if you don't mind ? and what about the cost of the car , it is tax deductible ?
The simplest way to explain this is your friend should be able to claim anything 100% relating to his taxi business as long as he's working for himself and not employed. So if the car is only used as a taxi, he should be able to list the car as a company asset as well as claim all fuel and other running costs as valid business expenses. He'll also receive tax relief for the car purchase. It gets more complicated if the car is also for personal use. At that point he may want to find an accountant who specialises in this to help.
I'd love to know more about IR35, who you can work for and who you can use for work ie agencies . Thanks for the video I've been wanting to go ltd from day one of returning to what I'm doing now but all this about ir35 has put me off and a mate who already is ltd has been told told few lies about contracting through agencies so I'd love if you have or can do a video on this please.. Thanks again for your info
In my experience, larger companies/corporations - always inside IR35. For example, I got called about an NHS contract this morning and turned it down flat. It's govt, so always within IR35. My thinking is that if they can't find good people (or need to pay twice the daily rate) then they might rethink this rubbish...all IR35 seems to be doing is suffocating the supply of workers... I went to part-time 2 years ago as I'm sick of working purely to line the increasingly greedy taxman's pockets...
hi, the video is very informative, thanks, two similar question, can a tier 2 visa holder start a limited company in a different domain than they are currently employed, can my partner having a dependent visa start a limited company in a different domain than they are currently employed?
thanks a lot for your comment! Because this has the potential to impact you significantly I would recommend seeking proper legal advice for clarification. Generally speaking it can be possible but you should confirm that with the Home Office. Usually the dependent visa actually has less working restrictions and it could be easier for your partner to operate a company than yourself.
I worked through an umbrella for 6 months and it was not simple. They charge a small fee but they also take THEIR tax and NI so I post thousands. They also claim they were not responsible for calculating my tax and NI and they made mistakes on my pay constantly. Umbrella companies are cheating our workers and there are organisations desperately trying to have them banned
Natalie Sassoon thanks a lot for your comment. Usually HMRC will adjust your tax code for the next year if too much has been collected from you. Umbrella companies do bill you the employer’s national insurance but there shouldn’t be any further tax. You would need to check your P60 or P45 from the umbrella company and see if the tax figure deducted matches your payslips. Remember that the tax deducted does not include national insurance. If the figures don’t match then you should get in touch with HMRC and explain your situation.
Thanks for the video, quick question. If you are VAT registered don't you have to pay 20% to HMRC. So your £28k income is only £23k straight away so any savings for going LTD are gone straight away... please explain if I'm wrong I'm just trying to understand
You don't register for VAT unless your earnings top £85K or there is a massive benefit to you by registering. If you are registered, you invoice for your pay *plus* the 20% VAT (so your £28K becomes £33,600), then if you're on the Flat Rate Scheme (which you should choose unless you buy loads of stock/equipment) you pay HMRC a percentage based on your industry (typically 15-17%), so you can actually *make* a bit of money. The people paying you the VAT can then (usually) claim it back on their scheme, but that's their issue not yours.
Thanks for your comment! Ultimately a limited company would be more tax efficient. If you only accept outside IR35 contracts then there would be no point in using an umbrella company :) You would also be able to determine your own IR35 status when contracting with ‘small’ companies. If a client is based outside the UK, then it’s unlikely that IR35 would apply at all. The other country may have their own version of IR35 but it would be difficult to be considered employed in another country whilst working remotely from the UK.
Hi Juniper , very informative , question is about Umbrella companies , I am approached by agency to go under umbrella company , the application and the contract received is talking about giving me a small salary of around £250 and the main salary will be paid as a loan . I have to sign this loan agreement and there are interests of %3 to %20 annually . what does it mean ? can they claim money back (so called Loan ), please advise .It is very much appreciated.how is the termination of contract with a umbrella company.
nader mohajer hi Nader, thanks for your comment! Normally umbrella companies simply act as an employer for you to do temporary contract work for clients - this means they’ll pay your normal daily rate as a salary and charge a small %fee for processing the payment (they also provide employers liability insurance and other employee benefits such as bank holiday pay and sick leave etc). I can’t comment on the arrangement you’re speaking of, all I can say is that there would be a risk of HMRC investigating your pay. It almost sounds like a way for you to avoid tax which is really not ideal.
If I use your service how long do I have to start my business as a limited company? How much time should I give the setup side of things before I start operating as a limited company? What is not included in the services that you're offering and what time should I give to organise this before I start operating? Thank you
If you're a limited company you don't need any services other than a local accountant. You can start a company up and operate immediately, but you'll need to open a bank account *in the company's name* and pay everything into that.
Thanks for your comment! You may be able to ask for the mileage allowance, however the most likely scenario would be claiming for the expense from HMRC on either a self-assessment or P87 form
NI is only paid when an employee is receiving salary over the weekly or monthly NI threshold so for this tax year if you receive £680 per month or less as salary then there is no employer or employee national insurance to pay to HMRC. In the case of an umbrella company, all of your pay is considered a salary so it is likely it'll be over £680 per month and you'll have to pay NI. With a limited company, any invoices created and paid will be the company's income rather than your own. You as the director can choose a salary for yourself and then opt to take quarterly dividends as a way of extracting profit from the company.
Juniper Lynx does that mean that equipment cost, travel and work location accommodation (if renting in two places..my home and my location of work ) company car, can be taken up as business expenses ? So I don't have to pay myself a higher salary to take up those costs? Thank you
@@youtubesuckss7058 Equipment cost is tax deductible through wear-and-tear. 25% loss in value per year from what I remember. Mileage: 45p per mile for the 1st 10,000 miles and less (10p...?) after that (if you use your own vehicle). Company Car: Forget it. They treat that the same as PAYE. Use your own car. Renting: No. Your home is nothing to do with the business unless you work there (in which case you can claim a small allowance for using your home as an office). Renting an office: Yes, this should be tax deductible. If you want a "higher salary", pay yourself a small salary (£12,500 a year) and pay anything on top as dividends. If you want to claim something is a dividend, it's much easier to argue if *you only pay yourself once or twice a year*. Don't do it monthly!
Hello Juniper you forgot to add PAYE for example i'm being offered a job right now as a driver and they are offering £17p/h (Ltd / Umbrella) or £13.00p/h (PAYE), 40hrs a week min - £50 a week travel / Accommodation Contribution i'm confused wich one to choose in this situation?
Ltd / Umbrella are vastly different! If you're confused by this kind of thing, always go PAYE. It's miles simpler and you don't have to worry about any details like self-assessment and paying tax sometimes as much as 18 months after you've earned it, the extra paperwork, etc.
For my industry (IT): Limited: Least tax, higher rates of pay Umbrella: Most tax, highest rates of pay (if not, turn it down!) Employment: Medium tax, lower rates of pay In terms of pay after tax: Limited: Best Umbrella: Middle Employment: Worst In terms of complication: Limited: More Complicated Umbrella: Most Complicated Employment: Easiest
Dividends are 8% provided they're within the normal PAYE band. They're separate sources of income to salary, but they are linked when considering your PAYE allowance. It's complicated, but as long as you're not paying yourself loads you should consider dividends are roughly 8%, not 20.
Hey hun , great video im such a newbie can you explain employers NI with umbrella does this vary , i was with an umbrella company and they deducted so much money from me that then i decided to go PAYE . Please help 😂
Sadly there are still too many 'inside' IR35 determinations that are incorrect, but it is getting better. Hopefully things will continue to improve due to demand for skilled consultants
If you don't take any money from the company (apart from repaying expenses) you don't actually receive any income. It's just your company's profit. However, I'd be wary of doing this if the company was actually making decent profit as it could be seen as benefit fraud since you're only holding off on taking funds to avoid losing the supported house. In general, you can basically choose what to pay yourself since the company is a separate entity. Again, there is a risk of benefit fraud.
@@JuniperLynx it's not my intention. I'm in a situation where I'm in supported housing, and if i get a job, I lose my house,. I would need to be able to save for month to get a deposit to move. And through a Ltd sounded the best way, as everythe work I do keep asking for LTDs.. But after hearing this ir35 rule, I'm not so sure.
@@doms6741 End of your company's tax year, but probably better to get acquainted with one or two locally before then so you're not in a mad panic to get the accounts done in time :)
Hey Shane that's a really good question. If you're running through a ltd company, you'll invoice as normal but then receive underpayments from the client you're working for through CIS. The invoices should be paid in full on your books and you can create an extra transaction to account for the underpayment (this'll be an outgoing payment in your business account, so if you received £1,000 for a £1,200 invoice - you would create a £1,200 payment towards the invoice, with £200 outgoing from the bank account). The outgoing payment should be allocated to the PAYE/NI account on your books. It will show as a payment due back to your company on the balance sheet - which will be reclaimed with your Corporation Tax return at the end of the trading year. In my experience it's not been the simplest process and if possible I'd suggest the following: If you're earning over £30k turnover through your Ltd company, you can actually call up (or submit the online form) and apply for Gross Payment status. This means no CIS deductions will be made as your company will be paid the gross value of invoices. It simplifies the process a lot but that also means you need to ensure you always have enough money in your business account to pay your corporation tax at the end of the year. Depending on your accounting software it should be fairly straightforward. Personally I enjoy FreeAgent despite the higher cost. Hope that helps!
Not a shock. It's been approaching for some time now... That's why you take "Inside" contracts at double the rate now, or turn it down. I'm not paying anyone that much for my efforts, so they can either pay stupidly inflated amounts or get some other mug to do it...
If I use your service how long do I have to start my business as a limited company? How much time should I give the setup side of things before I start operating as a limited company? What is not included in the services that you're offering and what time should I give to organise this before I start operating? What is the risks in working remotely with an accountant? Thank you
Apologies for the delay, I wasn't notified of your comment this time! Setting up the company takes about 24 hours. Then you need to setup your business account with the company's details (1-10 working days depending on the bank). Once that's done you can basically use it fully to start invoicing clients. We will also look at setting up VAT registration as it's usually beneficial to be on the flat rate scheme. It's also not time consuming. The only things that aren't included in our monthly price is additional self-assessments (so if you had a second company shareholder or director then those returns would cost extra). Other than that it's just our optional services like Business Insurance and the Registered Office Address that have an additional monthly fee. We'll deal with Payroll, VAT returns, director's self-assessment, year-end accounts, corporation tax return, dealing with HMRC on your behalf, assisting with FreeAgent software, notifying you of valid business expenses, dividend calculations, tax efficient drawings for the year etc. We also check through your company transactions to ensure everything's looking good from an accountancy standpoint. If you have something in mind that you need covered, let me know and I'll be able to confirm. Working remotely with an accountant has low risk since all records are kept securely online. We're also compliant with data protection laws, registered with the ICO and as an agent with HMRC. They have all our details. We're also registered for anti-money laundering regulation. You can reach us by phone or email, whatever is more convenient. Overall it's just the same as having an accountant next door to you, just that we don't physically meet very often! But there is the option for video calling :)
Usually if you're earning £120 per day or more as a contractor it's good to go limited. Would you like me to do a quick calculation for you as a comparison?
It depends how much you're earning and whether you may decide to continue contracting. Many people will try out contracting on a short 3 month contract but then carry on finding further contracts after that so setting up a company would be beneficial. On just £120 per day for 3 months of work it won't be worth it because of the accountancy fees. Most accountants work on an annual basis and 3 months of trading requires the same submissions as an entire year so they won't give much of a discount. It would cancel out a lot of the benefit from having a company. But if you're earning upwards of £300-£500 per day you can still keep more of your money with a Ltd company. Just check with the accountant how much they'll charge if you decide to stop using the company after a few months and want to close it down. Some will charge an extra fee for closing companies.
With the amount you're earning, it's still better to go Ltd but not if you don't know about being a contractor yet. You won't lose out on that much plus you'll get to try contracting for a few months without accountancy costs. So I think your decision is absolutely fine :)
Thanks for your comment! It is possible to submit a self-assessment (personal) tax return with HMRC regardless of your employment arrangements. An umbrella company simply acts as a third party employer so it wouldn't impact your ability to submit personal tax returns.
Hiya I work part time permenant as a registered Mental Health nurse..But I am looking to join a nursing agency which I'm thinking to put under a limited company I will later also be looking to start up a property investment business My question is could the companies have the same name or will they need to be different?
Thanks for your comment! A limited company will need to have an original name in order to be incorporated with Companies House. If you're looking to start two companies, unfortunately they can't have the exact same name. They can be similar but not identical. You can use the name checker tool to see what Companies House will accept after you create the first company: beta.companieshouse.gov.uk/company-name-availability For example one company could be XYZ Ltd and the second could be XYZ Properties Ltd. There is also an option to use trading names if that works better in your circumstances :) I hope that helps!
@@missb_8816 Also, if you're serious about going down the property route, your nursing company can (if you're the sole shareholder of both companies) send any excess profits to your property company at zero tax as a loan (which never actually needs to be repaid), and at 0% interest if you want. So rather than pay yourself (and get taxed), you could just save it (if you're in a decent financial position) in your nursing company, transfer it over to the property company and use it to buy properties.
Thanks for watching Limited Company vs Umbrella! To get started and setup your own company, just visit: juniperlynx.com/contact/
Is that an American accent I hear?
Juniper Lynx Hi Juniper, why ltd is not suitable when pay is less then 120? Thanks
@@knowhow993 Thanks for your comment! It's simply that the cost of running a limited company is relatively high. If the day rate is below £120 then the company would struggle to pay for itself.
For example tax savings between a limited company and sole trader only start becoming different at about £30,000 profit. The limited company starts becoming more tax-efficient after this point even with accountancy fees factored in.
Of course if you're determined to run your own business, then the limited company is a better arrangement from the beginning due to its legal separation.
Just found you .
Iam a limited company for about 7 years and vat resisted.
Found you very interesting and formative.
Thank you very much
Thanks for taking time to create a video and explaining everything in details, as agencies never reveal how much cut they take from you.
Glad I could help!
Thanking you on behalf of all young professionals for making this video!
I was completely unaware that most of this was even a thing until it just popped up in an email; thank you for explaining this in a clear manner.I think I have a better understanding of which applies to my current situation better
TheRichmaster thanks a lot for the great comment! Glad we could help :)
Thanks for making this video and helping me understand the differences. Great video and thanks for explaining with examples and numbers.
Glad it was helpful!
Thank you for explaining this so clearly, your videos are very informative. Many thanks again!
No problem! Glad if I could help :)
Amazing video, well explained. Much prefer the umbrella route as they secure contracts for you if you don't want to be worried about having to find your own clients. But the employer NI is something to think about!
Holy spitballs - so helpful! Thank you so much!
Really helpful video. Just moving into contracting needed to know which way to go. I assume this is all still valid.
Pretty much :)
This is like goooold. Answered soo many questions I had. Keep it up and build a personal brand for yourself!
I really appreciate the feedback. I'm glad this video helped you out!
U have just confirmed my doubts about umbrella many thanks what is the process of making a LTD company and linking it to your job
A very informative video. Thank you very much. For a salary of £120,000 on a permanent basis after Tax and NI take home is £78,653. (Umbrella is £57,466 and Ltd is £76,948). So, in this case permanent is the best option? When do they break even?
Ty so much for the explanation. Now i understand what i have to do.
Wow, thank you, just saw this video hours before signing for an umbrella company, which im now not going to sign
Thanks for this very inforamtive and well put together presentation. I appreciated it very much.
Thanks for your awesome comment!
Hello . Very informative video - thank you so much for taking the time. I would love to have a video on the comparison between umbrella companies and agency PAYE (which is my current predicament). :-)
Hey! Thanks a lot for your suggestion, I will add it to my list :) As a quick summary they should be very similar but I'd just double check with the agency's PAYE systems if it's going to be deemed payments through a Ltd company. The deemed payments through an agency work out less tax efficient and you also don't get any employee protection. In this case umbrella would be the winner.
@@JuniperLynx Thank you so much 😁. I've just started working as a locum. I will be locumming in the NHS and therefore can't have the full benefits of working as a limited company due to the IR35 regulations. I will get the agency and one of their recommended umbrella companies to give me a weekly calculation - including employee benefits - net of tax. 😀
@@mariadillon860 Ah yes that would be an issue for the company route. Get those calculations from them to check which is best. From my experience you'd have a better time with umbrella because you're technically employed by them hence the benefits! I hope it all goes well 😊
you have done it brilliantly. thank you
Thank you so much ^^
I could listen to you talk numbers all-day :)
Amazing
Dan
I kept think of Umbrella from Resident Evil.
I'm more than happy just knowing none of you lot will ever come near me again.
OK Barbara. Stop crying...
Juniper Lynx ... We in Scotland Salute YOU !!!! XXX ... I have just went Limited Company "coded welder"
So glad to hear you setup your own company! Congratulations! Thanks for your awesome comment :) If you need any help with your accounting requirements feel free to get in touch.
@@JuniperLynx ...You kno something Juniper can i speak to you somewhere else ... I might just take you up on your offer ... My name is Kevin Mutch on facebook xxx
@@JuniperLynx After watching your video i felt externally guided to SWITCH from Umbrella over to Limited ... What a huge difference in wages ... I have been using Brookson xxx But yet again feeling externally guided ... Are you telepatic ? - if so please refrain lol lol id love to talk to you x
The Fallen Angel definitely not telepathic lol! But I’m glad the video helped you 😁
@@JuniperLynx You have to admit my patter is Good ... Am shattered just finished welding Duplex for 12 hours ... So are you an accountant ? ...Thank you for the reply xxx
Very good, and very informative. Thank you very much. :)
glad I could help! :)
This is a very informative video, thank you so much.
Glad it was helpful!
This demystified a lot of stuff, thank you.
Thanks Juniper! Your videos are amazing and very educational!
glad to help!
Brilliant explanation! Thank you.
The good old days of contracting, and most being outside IR35.
Target small companies, start-ups etc. I read the room and did that 5 years ago.
A risk, yep, but I've never been inside IR35 due to being exempt (company size).
Thanks for making this video, really informative and clear. Trying to work out your accent, are you Australian?
Jacob Bannier sure thing! Glad to hear it helped :) haha haven’t heard that one before 😂 I am originally from America but live in England for some time now so I’ve mixed them somehow!
Excellent video, answered so many questions for me, thank you!
no worries Andy! Glad I could help :)
Keep the "Out" side as "out" as possible if you want to pay less tax. Go for "In" if you've got no "Out" options, or there is some kind of security included with an "In" contract, or you don't want to deal with the added paperwork of the "Out" side.
I work solely in the "Out" sector, but my brother works in the "In" sector - both have merits for each of us, and neither of us would ever swap.
Me: I don't want to pay a fortune in tax for my hard work and I understand the organisation, record-keeping and paperwork required.
Sometimes the tax I'm paying is from earning as much as 18 months ago, so you need to have a head for figures and an ability to save (or expect to go to prison).
Him: My brother would never want to deal with the complications of VAT, accountants, dividends, self-assessment, etc., etc. so he's happy just getting paid everything monthly even though he pays more tax.
Great video .
Thank you very much 👍👍👍👍🙏
In the ltd company example, didn't you miss out income tax and NI on the salary?
Thanks for your comment! There are personal allowances and national insurance thresholds available each tax year. If these are not exceeded, then there would be no tax or NI deductions from salary.
The personal allowance is £12,570 this year. The NI thresholds can be seen here: www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
Please note directors are able to utilise the annual thresholds for tax/NI purposes.
I hope that helps!
@@JuniperLynx Yeah thanks very much! I had forgotten about that!
So say If I have a business, and instead of registering self employed or as limited company, I go with the umbrella option. Will that still work? Only saying this as I would be employed rather self employed. Makes it much easier when getting a mortgage etc. Advise please :) Thanks.
Technically you could go umbrella, but you'll lose a lot of money that way to unnecessary deductions that you wouldn't have as a regular employee (apprenticeship levy, employer's NI etc). We've had plenty of limited company contractors successfully apply for mortgages, it just means you would need to build up accounts information and submit self-assessment tax returns for about 2-3 years to show that you have relatively stable income even though you're running your own business.
It may also be worth noting that umbrella contracts are not a form of permanent employment. This may be taken into consideration by the mortgage provider. Unfortunately we cannot provide financial advice so I'd recommend speaking with a mortgage advisor to see what would give you the best chance.
I am a UK Registered Nurse and doing Agency work, I have chosen Umbrella Company from the list given by nursing agency, what should I do if I want to use limited conpany please?
Thanks for your comment! If you are working in the public sector, then the 'end client' would need to determine your IR35 status. 'Outside IR35' would be a business to business arrangement, whereas 'Inside IR35' would be considered employment.
If you can find an 'outside IR35' contract then you would be able to set up a limited company and start your own business. If you can only find 'inside IR35' contracts, then there would be no benefit in opening a limited company. 'Inside IR35' contracts require you to be 'taxed like an employee' but don't necessarily include employment rights. This means that all tax and national insurance would be deducted at source (by your client or through an umbrella company).
If your pay from an 'inside IR35' role is sent to your company's bank account, it would simply be treated like net pay salary and wouldn't affect the company accounts.
I hope that helps!
@@JuniperLynx thanks
How should I work as an agency nurse by establishing my own limited company please?
thank for the tutorial, I'm looking on HMRC website and so both NI's makes a sum theoretically someone will required to pay 25.8% to cover both NI?
Glad to help! Yes that's right. Normally as an employee you wouldn't even see the employer's NI so it's just 12%. However through umbrella they will deduct this from your payslip because they're simply providing an employment service.
Yep. The govt are saying: "You're not really a company so pay your PAYE and NI!"
And at the *same time* they're saying: "You're a company! Pay your employers NI as well please!".
So, you're a company and not a company to suit them depending on which way the wind is blowing... 🙄
Old video but still very good thanks
How can people that work under CIS scheme pay less tax if they organize themselves under Umbrella or Ltd Company?
If you're going through Umbrella, you'd be an employee of the umbrella company. You would pay normal tax rates plus the umbrella fees so actually you would earn less especially because you wouldn't be able to reclaim expenses.
A limited company would still need to be CIS registered if you're working in that industry. You can apply for gross payment status so there are no deductions but you need a certain amount of turnover.
Basically you won't pay any more or less tax from CIS deductions. The CIS employers simply deduct 20/30% up front from you/your company, then you work out what is actually due each year from your profits. Any CIS deductions are offset against the tax bill and you would normally end up overpaying. At this point the tax can be refunded from HMRC by making a claim.
Great Video, very factual. Cheers 👍
Taj Chana thanks for your awesome comment! Really appreciate it :)
How do i get paid from my limited company to get a mortgage in the same time frame (3months) as i would be working direct for a company?
You should still stay tax efficient when paying yourself from your Ltd company as the mortgage broker will look at the health of your company as well as your personal income. So even if you don't take any money from the company they'll still consider how well it's doing. Normally the broker will want a complete set of accounts (12 months of trading). They may allow you to provide provisional figures if your company hasn't been trading very long.
Expect for them to ask for at least 1 or 2 years finalised accounts for a mortgage application, which is effectively 2 to 3 years operating minimum.
Possible to combine a employee perm role with Ltd contract?
I love your name!
Really useful, thanks. Great video. Is there ever a situation where you could have both umbrella and a Ltd company? For example, if your jobs were 50% inside IR35 and 50% out? Or, is it always better to just stick with one approach?
No problem! I would say it's better to keep them separate as you'll get the most financial reward this way. For example if you were caught inside IR35 for a particular client, run that through umbrella. You should still be able to have your own limited company for private work on the side that isn't a 'disguised employment'. You can also claim all legitimate business expenses associated with your private work.
The funny thing is that if you have more than 1 contract running at the same time it's almost impossible to be an employee of the other client. The public sector rules are a little bit crazy right now.
@@JuniperLynx Thanks! I heard that there's going to be some major changes to IR35 rules for contractors working in the private sector in April 2020. Does that mean it's all going to be as bad as the public sector? Would be good to get a mini video with your thoughts on the proposed changes.
I’ve been told it’s not worth going vat registered if you’re not making more than 85k a year
Thanks for your comment! It depends on whether your customers are VAT registered and also how many VAT expenses you have.
For example if you're a consultant and have minimal expenses with a client who is VAT registered, then you could register for the flat rate VAT scheme and essentially get some extra income into the business. Your fees wouldn't increase by being VAT registered since the client can just reclaim the VAT from HMRC.
If you were selling products or services to individuals that are not VAT registered, then it's unlikely that VAT registration would benefit your company that much. Of course once you reach the £85k threshold then you'll need to register so it may be worth setting up your pricing in a way that makes sense when that does eventually happen :)
I work for public sector doing different roles where I find work, I have been doing it for over 6 years now. Is it worth doing limited company? My pay has gone higher and is around £200 per day...Is it worth doing limited company? Or just stick to umbrella?
The only issue with the public sector is that they tend to blanket cover everyone inside IR35, so even if you try to work through your own company you'll be worse off due to 'deemed payments' and you won't get any holiday time or employee protection like you would with umbrella. If they'll declare you outside of IR35 (working legitimately as a business, not an employee) then the Ltd option will be better financially and also give you more flexibility/control over your money. Just ensure an appropriate IR35 friendly contract is in place and you are treated as an external consultant/contractor. Check with the end client if they see you as inside or outside IR35 based on your working arrangements.
Public sector is always Inside IR35, so forget a Ltd. company.
Nice video easy to digest
Thanks a lot for the feedback! It's much appreciated :)
Informative, clear, interesting - relief :)
Hi. Nice video. Will you please mention what is your qualification. I mean r u member of icaew, Acca, aat or cta
Hi Caroline, I'm currently working as an employee of an umbrella company who provide me benefits like pension, paid leave and so on. The company has a contract with the end client where I'm currently doing my project. I wish to change the relationship so that the umbrella treats me like a contract worker. This would mean that i lose out on paid leave and pension. What would be the adv and disadvantages if i do so ?
thanks for your question! I'm not sure I fully understand. Umbrella companies are there for the sole purpose of employing you and ensuring you have basic employee rights while contracting.
If you wish to break away from an employment arrangement, you'd need to setup your own Ltd company and go direct with the agency for a new contract. Is this what you mean?
@@JuniperLynx Thanks for your response. Let me try to explain, the end client does not want to have contractors working as ltd company due to IR35 regulations. Currently I'm employed with the agency and work on the end client project. Would it better to terminate my employment relationship with the agency and work agency PAYE. I would lose out on my yearly paid leave, pension but i think i only need to pay a weekly fee to the agency. Is there an advantage of doing this ? There are no benefits as an employee to the agency.
@@venkatramang9221 Ok that makes sense. This means the end client thinks you are operating inside IR35.
Normally what would happen is you receive 'deemed payments' into your limited company when it's an inside IR35 contract.
You won't receive any benefits of being an employee but you'll get taxed the same if not more than going through an umbrella company PAYE.
Other than that I'm not sure what you mean regarding agency PAYE. PAYE is the same as employment so you should still receive benefits like holiday pay and pension. Also the agency wouldn't normally employ you directly, they would however charge a fee to calculate the deemed payments into your own limited company.
I hope that helps clear things up! Let me know if I misunderstood anything.
@@JuniperLynx Thank you very much. It is much clearer now :)
@@venkatramang9221 I'm glad I could help you! This sort of issue is currently happening in the Public Sector because of the IR35 changes. It means the end client can decide your IR35 status and they're directly liable for your tax if it turns out you were inside IR35 all along (if they deemed you were outside initially). Essentially they don't want to take on the risk so they'll just say you're inside in most cases.
I wish you all the best going forward! :)
This year was my first year doing limited contracting. But I have been taking out money from my business bank account, disregarding my accountants summary pay to transfer. Does this mean that I will be penalised? Will I pay a £1000 fine? Any other repercussions? I am a little bit stressed about it
Hi there, I wasn't notified of this comment so apologies for the delay. There won't be any penalty for not taking money out from your company. It just means you may have missed out on some tax savings during that year which is why your accountant advised you to transfer some out. For example there is a £2000 dividend allowance which is tax-free regardless of other earnings. If your accounts and self-assessments are done on time then no need to worry.
I@@JuniperLynx Thanks for your reply but i didnt 'not take any money out' I took money out, above of my home in take! I just hope they don't audit me or anythign like that
MiscellTube apologies I misread your comment. In that case your accountant should have seen your business bank transactions and reported any dividend drawings to HMRC on your self assessment. If you were taking money to repay yourself for expenses there wouldn’t be any tax for you to pay. Same for salary as that’s done through PAYE each month. Did you try asking your accountant if they declared your income? If you paid tax then no problem. If not and you had extra income then you’ll need to pay any tax due plus interest.
@@JuniperLynx I think I didn't explain it properly. Are you on Skype? If so email me Ayman_shalash@yahoo.co.uk
@@Oranjee1089 If you're taking money out of a Ltd. company regularly, you'll struggle to claim that they are dividends. HMRC will deem it a salary and tax it as a salary. If it's less than £12,500 don't worry as you don't pay tax on that anyway.
Anything more than £12,500 salary will be taxed at 20%. Anything above £50,270 will be taxed at 40%.
Dividends: Expect to pay about 8% (the rules keep changing for the worse) on all dividends. Higher rate is about 34% and is more complicated to calculate because the rate is based on all income, not just dividends.
*If you want to pay something as a dividend and pay less tax, you have to do it less often. For example, I pay myself one chunk of money every 12 months. Every 6 or 12 months is realistic. You can't take it regularly and claim it's a dividend.*
IS IT POSSIBLE TO HAVE BOTH Limited Company and limited company by working for NHS for umbrella and also have limited company by doing some hours for private throught limited company.?
There's no problem to work with the NHS through umbrella and have a separate limited company for other projects on the side :)
Hi dear,
Thanks for uploading a nice informative video.
I have been offered a job as a contractor on 80 pounds per day basis and am being asked to go any umbrella company or limited company. If I go with the umbrella company how much will I get after paying taxes ,NI and umbrella company will also charge.Will there be any hidden cost or anything like I should know about??
TIA
pooja soni hey there, thanks for the comment! With umbrella you can usually ask them to provide you with a calculation of what your take home pay will be. They should also have terms and conditions that you can check through to make sure what fees they charge. Unfortunately as all umbrella companies operate with their own fees I can’t accurately say what the final amount will be :)
Hi! I have a doubt about my payslips, i think the umbrella company is wrong the discounts, i already contact then but they explanations are confused for me. Can you help with this doubts?
Thank you
Hi Diana, thanks a lot for reaching out. I have limited experience with Umbrella processes as each company is different. Would it be possible to ask them for the explanation in writing? Simply email it to us at hello@juniperlynx.com and I'll have a look for you.
Your smile is so cute😍😍
Oh for God's sake... 🙄
My friend bought a car on instalment to work for UBER taxi, what expenses can he claim if you don't mind ? and what about the cost of the car , it is tax deductible ?
The simplest way to explain this is your friend should be able to claim anything 100% relating to his taxi business as long as he's working for himself and not employed. So if the car is only used as a taxi, he should be able to list the car as a company asset as well as claim all fuel and other running costs as valid business expenses. He'll also receive tax relief for the car purchase. It gets more complicated if the car is also for personal use. At that point he may want to find an accountant who specialises in this to help.
I'd love to know more about IR35, who you can work for and who you can use for work ie agencies .
Thanks for the video I've been wanting to go ltd from day one of returning to what I'm doing now but all this about ir35 has put me off and a mate who already is ltd has been told told few lies about contracting through agencies so I'd love if you have or can do a video on this please..
Thanks again for your info
In my experience, larger companies/corporations - always inside IR35.
For example, I got called about an NHS contract this morning and turned it down flat. It's govt, so always within IR35.
My thinking is that if they can't find good people (or need to pay twice the daily rate) then they might rethink this rubbish...all IR35 seems to be doing is suffocating the supply of workers...
I went to part-time 2 years ago as I'm sick of working purely to line the increasingly greedy taxman's pockets...
hi, the video is very informative, thanks, two similar question, can a tier 2 visa holder start a limited company in a different domain than they are currently employed, can my partner having a dependent visa start a limited company in a different domain than they are currently employed?
thanks a lot for your comment! Because this has the potential to impact you significantly I would recommend seeking proper legal advice for clarification. Generally speaking it can be possible but you should confirm that with the Home Office. Usually the dependent visa actually has less working restrictions and it could be easier for your partner to operate a company than yourself.
another excellent video
Sooooo hepfulll !!! Thanks a lot Caroline !!
glad to help!
I worked through an umbrella for 6 months and it was not simple. They charge a small fee but they also take THEIR tax and NI so I post thousands. They also claim they were not responsible for calculating my tax and NI and they made mistakes on my pay constantly. Umbrella companies are cheating our workers and there are organisations desperately trying to have them banned
Natalie Sassoon thanks a lot for your comment. Usually HMRC will adjust your tax code for the next year if too much has been collected from you. Umbrella companies do bill you the employer’s national insurance but there shouldn’t be any further tax. You would need to check your P60 or P45 from the umbrella company and see if the tax figure deducted matches your payslips. Remember that the tax deducted does not include national insurance. If the figures don’t match then you should get in touch with HMRC and explain your situation.
Thanks for the video, quick question. If you are VAT registered don't you have to pay 20% to HMRC. So your £28k income is only £23k straight away so any savings for going LTD are gone straight away... please explain if I'm wrong I'm just trying to understand
You don't register for VAT unless your earnings top £85K or there is a massive benefit to you by registering.
If you are registered, you invoice for your pay *plus* the 20% VAT (so your £28K becomes £33,600), then if you're on the Flat Rate Scheme (which you should choose unless you buy loads of stock/equipment) you pay HMRC a percentage based on your industry (typically 15-17%), so you can actually *make* a bit of money.
The people paying you the VAT can then (usually) claim it back on their scheme, but that's their issue not yours.
@P A thanks for explaining! I now understand you would add the VAT onto your rate rather than take 20% from it 👍🏼
As of April '21, is this all still valid other than the IR35 nonsense?
Thanks for your comment! Ultimately a limited company would be more tax efficient. If you only accept outside IR35 contracts then there would be no point in using an umbrella company :)
You would also be able to determine your own IR35 status when contracting with ‘small’ companies.
If a client is based outside the UK, then it’s unlikely that IR35 would apply at all. The other country may have their own version of IR35 but it would be difficult to be considered employed in another country whilst working remotely from the UK.
Hi Juniper , very informative , question is about Umbrella companies , I am approached by agency to go under umbrella company , the application and the contract received is talking about giving me a small salary of around £250 and the main salary will be paid as a loan . I have to sign this loan agreement and there are interests of %3 to %20 annually . what does it mean ? can they claim money back (so called Loan ), please advise .It is very much appreciated.how is the termination of contract with a umbrella company.
nader mohajer hi Nader, thanks for your comment! Normally umbrella companies simply act as an employer for you to do temporary contract work for clients - this means they’ll pay your normal daily rate as a salary and charge a small %fee for processing the payment (they also provide employers liability insurance and other employee benefits such as bank holiday pay and sick leave etc). I can’t comment on the arrangement you’re speaking of, all I can say is that there would be a risk of HMRC investigating your pay. It almost sounds like a way for you to avoid tax which is really not ideal.
If I use your service how long do I have to start my business as a limited company? How much time should I give the setup side of things before I start operating as a limited company? What is not included in the services that you're offering and what time should I give to organise this before I start operating?
Thank you
If you're a limited company you don't need any services other than a local accountant. You can start a company up and operate immediately, but you'll need to open a bank account *in the company's name* and pay everything into that.
Can I ask for milage allowance if I opt for umbrella contract?
Thanks for your comment! You may be able to ask for the mileage allowance, however the most likely scenario would be claiming for the expense from HMRC on either a self-assessment or P87 form
why isn't NI paid with a limited company?
NI is only paid when an employee is receiving salary over the weekly or monthly NI threshold so for this tax year if you receive £680 per month or less as salary then there is no employer or employee national insurance to pay to HMRC.
In the case of an umbrella company, all of your pay is considered a salary so it is likely it'll be over £680 per month and you'll have to pay NI.
With a limited company, any invoices created and paid will be the company's income rather than your own. You as the director can choose a salary for yourself and then opt to take quarterly dividends as a way of extracting profit from the company.
Juniper Lynx does that mean that equipment cost, travel and work location accommodation (if renting in two places..my home and my location of work ) company car, can be taken up as business expenses ? So I don't have to pay myself a higher salary to take up those costs?
Thank you
@@youtubesuckss7058 Equipment cost is tax deductible through wear-and-tear. 25% loss in value per year from what I remember.
Mileage: 45p per mile for the 1st 10,000 miles and less (10p...?) after that (if you use your own vehicle).
Company Car: Forget it. They treat that the same as PAYE. Use your own car.
Renting: No. Your home is nothing to do with the business unless you work there (in which case you can claim a small allowance for using your home as an office).
Renting an office: Yes, this should be tax deductible.
If you want a "higher salary", pay yourself a small salary (£12,500 a year) and pay anything on top as dividends. If you want to claim something is a dividend, it's much easier to argue if *you only pay yourself once or twice a year*. Don't do it monthly!
Hello Juniper you forgot to add PAYE for example i'm being offered a job right now as a driver and they are offering £17p/h (Ltd / Umbrella) or £13.00p/h (PAYE), 40hrs a week min - £50 a week travel / Accommodation Contribution i'm confused wich one to choose in this situation?
Ltd / Umbrella are vastly different!
If you're confused by this kind of thing, always go PAYE. It's miles simpler and you don't have to worry about any details like self-assessment and paying tax sometimes as much as 18 months after you've earned it, the extra paperwork, etc.
Thanks for Juniper, Ltd v Umbrella, can you make vdo umbrella v employment please ?
For my industry (IT):
Limited: Least tax, higher rates of pay
Umbrella: Most tax, highest rates of pay (if not, turn it down!)
Employment: Medium tax, lower rates of pay
In terms of pay after tax:
Limited: Best
Umbrella: Middle
Employment: Worst
In terms of complication:
Limited: More Complicated
Umbrella: Most Complicated
Employment: Easiest
What about the devidends!? Everything over the personal tax allowance is taxed 20% + the taxation of the dividends.
Dividends are 8% provided they're within the normal PAYE band. They're separate sources of income to salary, but they are linked when considering your PAYE allowance. It's complicated, but as long as you're not paying yourself loads you should consider dividends are roughly 8%, not 20.
Hey hun , great video im such a newbie can you explain employers NI with umbrella does this vary , i was with an umbrella company and they deducted so much money from me that then i decided to go PAYE . Please help 😂
Today , everyone’s inside IR35 lol
Sadly there are still too many 'inside' IR35 determinations that are incorrect, but it is getting better. Hopefully things will continue to improve due to demand for skilled consultants
I'm not.
Hello ,
Is it possible for me to contact you.
I'm struggling..And I'm using an umbrella company due to what my agency wants.
Need advice.
Thanks for the comment! Feel free to email us at hello@juniperlynx.com and we'll see how we can help
Are you a RN? I am thinking of joining as an agency nurse.
thank you so much
what options do we have when every contractor is now under IR35?
Is there a way of setting up a company, and not paying myself, so I don't need to move out of my supported house?
If you don't take any money from the company (apart from repaying expenses) you don't actually receive any income. It's just your company's profit. However, I'd be wary of doing this if the company was actually making decent profit as it could be seen as benefit fraud since you're only holding off on taking funds to avoid losing the supported house. In general, you can basically choose what to pay yourself since the company is a separate entity. Again, there is a risk of benefit fraud.
@@JuniperLynx it's not my intention.
I'm in a situation where I'm in supported housing, and if i get a job, I lose my house,. I would need to be able to save for month to get a deposit to move. And through a Ltd sounded the best way, as everythe work I do keep asking for LTDs.. But after hearing this ir35 rule, I'm not so sure.
@@JuniperLynx also, would you say I need an accountant from the beginning? Or wait till the end of the tax year?
@@doms6741 End of your company's tax year, but probably better to get acquainted with one or two locally before then so you're not in a mad panic to get the accounts done in time :)
I still dont know what an Umbrella company is?.
Is that a question or a statement...?
Great video but where does CIS come into this? I'm an electrician's mate considering opening a ltd company
Hey Shane that's a really good question. If you're running through a ltd company, you'll invoice as normal but then receive underpayments from the client you're working for through CIS. The invoices should be paid in full on your books and you can create an extra transaction to account for the underpayment (this'll be an outgoing payment in your business account, so if you received £1,000 for a £1,200 invoice - you would create a £1,200 payment towards the invoice, with £200 outgoing from the bank account).
The outgoing payment should be allocated to the PAYE/NI account on your books. It will show as a payment due back to your company on the balance sheet - which will be reclaimed with your Corporation Tax return at the end of the trading year. In my experience it's not been the simplest process and if possible I'd suggest the following:
If you're earning over £30k turnover through your Ltd company, you can actually call up (or submit the online form) and apply for Gross Payment status. This means no CIS deductions will be made as your company will be paid the gross value of invoices.
It simplifies the process a lot but that also means you need to ensure you always have enough money in your business account to pay your corporation tax at the end of the year. Depending on your accounting software it should be fairly straightforward. Personally I enjoy FreeAgent despite the higher cost.
Hope that helps!
You have been so helpful. Much appreciated!
Thank you very much!
Umbrella means you are paying close to 50% tax. Shock if you are used to Ltd co. outside IR35.
Not a shock. It's been approaching for some time now...
That's why you take "Inside" contracts at double the rate now, or turn it down.
I'm not paying anyone that much for my efforts, so they can either pay stupidly inflated amounts or get some other mug to do it...
I hope someone can answer my question below as I'm kinda waiting on you as i'd like to use your service
Apologies, I can't see your question anywhere. What did you want to know?
If I use your service how long do I have to start my business as a limited company? How much time should I give the setup side of things before I start operating as a limited company? What is not included in the services that you're offering and what time should I give to organise this before I start operating?
What is the risks in working remotely with an accountant?
Thank you
Juniper Lynx kinda urgent :)
Apologies for the delay, I wasn't notified of your comment this time! Setting up the company takes about 24 hours. Then you need to setup your business account with the company's details (1-10 working days depending on the bank). Once that's done you can basically use it fully to start invoicing clients. We will also look at setting up VAT registration as it's usually beneficial to be on the flat rate scheme. It's also not time consuming.
The only things that aren't included in our monthly price is additional self-assessments (so if you had a second company shareholder or director then those returns would cost extra). Other than that it's just our optional services like Business Insurance and the Registered Office Address that have an additional monthly fee. We'll deal with Payroll, VAT returns, director's self-assessment, year-end accounts, corporation tax return, dealing with HMRC on your behalf, assisting with FreeAgent software, notifying you of valid business expenses, dividend calculations, tax efficient drawings for the year etc. We also check through your company transactions to ensure everything's looking good from an accountancy standpoint.
If you have something in mind that you need covered, let me know and I'll be able to confirm.
Working remotely with an accountant has low risk since all records are kept securely online. We're also compliant with data protection laws, registered with the ICO and as an agent with HMRC. They have all our details. We're also registered for anti-money laundering regulation. You can reach us by phone or email, whatever is more convenient. Overall it's just the same as having an accountant next door to you, just that we don't physically meet very often! But there is the option for video calling :)
How much money do I need to be earning to go limited hassle free.
Usually if you're earning £120 per day or more as a contractor it's good to go limited. Would you like me to do a quick calculation for you as a comparison?
Juniper Lynx what if it's a 3 month contract? If so then yes pls.
It depends how much you're earning and whether you may decide to continue contracting. Many people will try out contracting on a short 3 month contract but then carry on finding further contracts after that so setting up a company would be beneficial.
On just £120 per day for 3 months of work it won't be worth it because of the accountancy fees. Most accountants work on an annual basis and 3 months of trading requires the same submissions as an entire year so they won't give much of a discount. It would cancel out a lot of the benefit from having a company.
But if you're earning upwards of £300-£500 per day you can still keep more of your money with a Ltd company. Just check with the accountant how much they'll charge if you decide to stop using the company after a few months and want to close it down. Some will charge an extra fee for closing companies.
With the amount you're earning, it's still better to go Ltd but not if you don't know about being a contractor yet. You won't lose out on that much plus you'll get to try contracting for a few months without accountancy costs. So I think your decision is absolutely fine :)
Juniper Lynx thank you
Great info
Can you file for tax return under umbrella?
Thanks for your comment! It is possible to submit a self-assessment (personal) tax return with HMRC regardless of your employment arrangements.
An umbrella company simply acts as a third party employer so it wouldn't impact your ability to submit personal tax returns.
@@JuniperLynx ok thanks a lot
Thanksxxx
16:30 no NI for Limited company???
Not if you pay yourself a small salary and pay the rest in dividends.
Why do you think contractors opened Ltd. companies...?
HELL MET MAN - Protesting against the UK's IR35 Regulations - RUclips
Hiya I work part time permenant as a registered Mental Health nurse..But I am looking to join a nursing agency which I'm thinking to put under a limited company
I will later also be looking to start up a property investment business
My question is could the companies have the same name or will they need to be different?
Thanks for your comment! A limited company will need to have an original name in order to be incorporated with Companies House. If you're looking to start two companies, unfortunately they can't have the exact same name. They can be similar but not identical. You can use the name checker tool to see what Companies House will accept after you create the first company: beta.companieshouse.gov.uk/company-name-availability For example one company could be XYZ Ltd and the second could be XYZ Properties Ltd. There is also an option to use trading names if that works better in your circumstances :) I hope that helps!
Thanks for your response.
@@missb_8816 Also, if you're serious about going down the property route, your nursing company can (if you're the sole shareholder of both companies) send any excess profits to your property company at zero tax as a loan (which never actually needs to be repaid), and at 0% interest if you want.
So rather than pay yourself (and get taxed), you could just save it (if you're in a decent financial position) in your nursing company, transfer it over to the property company and use it to buy properties.
Don't ever use an umbrella, bullshit, ever, it's a total scam.
Umbrella is just PAYE without any rights or benefits whatsoever. It’s an employee with no rights. It should be outlawed.
Not true actually. You can get benefits thru an umbrella.
@@PA-lf8sd absolute shite
What is she talking about🥱
Don't worry about it dearie...something tells me it'll never affect you.
Confused accent.
Not really relevant anymore and really only applies to low paid contractors.
Rubbish.
Why do you keep drifting into an American accent. So annoying