Author Topic: Self-employment/contracting through an agency/own company tax efficiency  (Read 1270 times)

Unregistered123

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First time actually thinking about going into self-employment/contracting through an agency/own company.

Since I can see I have a lot to read through and a number of things to compare (plus a lot of people make a very good living by understanding this in detail), I don't necessarily hope for a step by step guide, but any advice would be appreciated.

It should be assumed we are talking about higher or additional tax band type income. I hoped it to be a discussion both about tax, NI and pension, summarizing what the most efficient type of setup would be.

My gut feeling is that establishing a chain of companies, with the end ownership in a tax haven, should be most efficient; with the UK subsidiary acting as your employer/agency.

UKMustache

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #1 on: February 13, 2018, 06:05:44 AM »
If you want some advice, my advice would be not to bother.

When HMRC catches up with you and charges you the tax you should have paid plus a 50% penalty on top, you will wish you had taken my advice.

dreams_and_discoveries

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #2 on: February 13, 2018, 11:40:02 AM »
In brief, my thoughts:

Tax avoidance = legal, tax evasion =  dodgy.

Incorporate in uk = legal, incorporate in tax haven = dodgy.


Watch them all fall down

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #3 on: February 15, 2018, 01:01:23 PM »
It can also depend on what area you plan to work in. Some recent changes in I.T. Contacting if you work in the public sector, and these changes will soon be rolled out to contractors who work in the private sector (well, it looks that way...)

ExitViaTheCashRamp

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #4 on: February 16, 2018, 05:32:07 AM »
The way things legislation has been going over the past 10 years has been to ever reduce the perks of contracting:

IR35 including retroactive tax status changes by HMRC
Retroactive clamp down of declared avoidance schemes (Hello Jimmy Carr !)
Tax on dividends
Flat Rate VAT scheme change
Claimable allowances changes

.. I am sure there are much more that has slipped my mind.

 and much of that was under a Conservative government. If Jezza gets in all bets are off. You circumstances may still mean it is still very worthwhile - but it is not the great avoidance scheme it once was.

Watch them all fall down

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #5 on: February 16, 2018, 07:25:40 AM »
The big thing is the client putting you on PAYE :(

Only worth using an umbrella company for IT contracting then. Bring back the pre 2000's,  name your day rate and away you go :)

skip207

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Re: Self-employment/contracting through an agency/own company tax efficiency
« Reply #6 on: February 23, 2018, 02:27:41 AM »
I contracted for just under 10 years.
I was LTD most of that time.

IME U Cos are not in any way worth doing and I would never take a contract that mandated U Co payment method.

Its a complex area and everyone has different circumstances.  I did very well out of it and I was always pleasantly surprised when the accountant came back with the end of year figures and what tax I owed. 

I have other friends who were in the same job for the same client and it was a total pain in the rear.  Some had got behind on doing their CT600s others were struggling to get mortgages.  It opens up a whole can of worms when things go wrong.

Like I said I was lucky and it worked well for me. 

Also don't underestimate how much things like pensions and holidays cost... when you are on a daily rate its easy to just take that day rate and x 230 days (or whatever) and bingo that's your income.  Does not work like that.  In the early days of contracting I took a 3 week holiday, firstly it cost me 15 days.  Then because I had been "off project" things got moved around and I got back to chaos and I had been moved from one office to another. 

Get good insurance.  Get a good accountant.  I would budget 3-5% of your daily rate for that alone depending on your sector.

IR35 is an issue and you do need to be aware of it but if you really are a contractor on a short term contract and have the correct clauses in your contract then you are ok.  I know "contractors" who have sat at the same desk for the last 10-15 years.  They are not really contractors and IR35 is designed for them.