Information required on Contract Job

[npanglia]

Hi,
I have currently got a contract job and hence decided to leave my permanent job. Need some help from seniors who are engaged in contracting:
1. Do I have register my own company or do I have to enroll with an umbrella company? or I can simply register as self employed with HMRC and I am fine.
2. Continuing to Q1 in whose name will the contract be issued?
3. What is most effective (economically and speed) route?
4. What shall I be careful while drawing salary and paying income tax, such that my Tier 1 Visa extension is not impacted?

Please advice.
NP

[cheshiregoan]

1. Do I have register my own company or do I have to enroll with an umbrella company? or I can simply register as self employed with HMRC and I am fine.

You will need to set up your own company or go through an umbrella if you are working as a contractor.

2. Continuing to Q1 in whose name will the contract be issued?

Technically the company you will be working at will sign an agreement with your limited company or your umbrella company, and your contract will be with them.

3. What is most effective (economically and speed) route?

Long term having your own company is probably cheaper but in terms of time spent, hassle and legal compliance (IR35) working through an umbrella is more convenient.

Here is a good website to explain this better:

http://www.umbrellacompanies.org/umbrel ... explained/

4. What shall I be careful while drawing salary and paying income tax, such that my Tier 1 Visa extension is not impacted?

Just ensure that your income after all "expenses" is above the income threshold you require for the points.

Assuming you need £40000 to earn the required points and your contract is for £25 p/h, this will be mean that you could earn approx £44000 gross (assuming 48 weeks a year and 37 hours per week). In this instance, please ensure you do not claim more than £4000 per annum in expenses, so that your taxable income stays above the £40000 limit.

[npanglia]

Hi,
Thanks for the info.

However could you please let me know approx. how much difference in takehome will be when engaged via umbrella company vs. self employment?

Also on a general note (apart from general gyan) how is experience of contracts... do they prefer to continue doing contracting or they think it was better to stay with or get a permanent job?

NP

[cheshiregoan]

Hi,
Thanks for the info.

However could you please let me know approx. how much difference in takehome will be when engaged via umbrella company vs. self employment?

Also on a general note (apart from general gyan) how is experience of contracts... do they prefer to continue doing contracting or they think it was better to stay with or get a permanent job?

NP

The website I had provided you on the previous post gives links to various umbrella companies who will give you free no obligation quotes so that will give you an exact figure.

Roughly you are about 5-10% better off by your own limited company but you have to factor in that the Accountant for Limited Company and the fee for umbrella service. Also, you have to spend a few hours each month to do all the paperwork for your limited company but with the umbrella it is much lesser.

Ultimately limited company is cheaper but it has more work involved.

As for the contract vs permanent, if you do more than 24 months on the same site, you will lose the tax benefits of being contractor and for tax purposes you are treated as permanent employee but for the company you are still a contractor.

Also, whether it is better to be permanent or contractor is totally dependent on your circumstances. I work in the automotive industry and we have lots of contractors especially in some key engineering skills which are highly in demand but skills which are not so much in demand, it is better to be permanent.

I would advise that once you start your new role, you should see how many contractors are actually on site, take their advice as to how long they are working there, etc and you will get a clearer idea as to the job situation and be able to take a better decision.

[npanglia]

Thanks for taking time to reply.

I am looking to go with self employment, however is it possible to register the company to my residence address (considering the property is rented) or the official address need to be a commercial property?

NP

[cheshiregoan]

Thanks for taking time to reply.

I am looking to go with self employment, however is it possible to register the company to my residence address (considering the property is rented) or the official address need to be a commercial property?

NP

Yes that shouldn't be a problem because you can always change the registered address for a fee if you decide to move.

Other possible options could be to register the company at your accountant's office address, if you have decided on one, or if you have any friends who have a "permanent" UK address, you could also register at their address.

The registered address has no bearing on where the company does its work. Many companies have their registered office and head office at different addresses, it is quite normal.