Thinking of Contracting for the first time?
If you are thinking of moving from permanent employment to contracting or freelancing, then stop for a moment and consider your options.
In particular, you need to set up your new business in the best way possible whilst making it easier for your customers to deal with you.
We've summarised here for you the alternatives along with the pros and cons of each method; you can also read more about 'Moving from a Composite, Umbrella or Managed Service Company' here and for more details about 'how much can I earn as a contractor' visit our new page.
Another page we are sure you will find incredibly useful is: Take home pay Limited company or Umbrella company - The Real Story.
If you are thinking of contracting through your own company click here to read our new straightforward guide on how to contract through your own limited company or download our free step-by-step guide to contracting.
You may also find the following pages, guides and case studies useful:
Take home pay calculator - How much could you be taking home
Limited or Umbrella? Can't decide? - We help you decide which is best for you
Take home pay case studies - Examples of contractors using a ltd co. & umbrella co.
Expenses Guide - Know exactly what you can claim
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35
Your options . . .
Following the April 2007 Budget announcements there are only two real options for contractors:
1. Operate through your own limited company. It is very important to stress that these must be genuine, one person Limited Companies and not a 'scheme' dreamed up by what are nothing more than marketing organisations.
2. Work through a PAYE umbrella company and pay full income tax and full national insurance contributions on your entire earnings. For details of SJD's umbrella company visit www.contractorumbrella.com.
A large percentage of "employment services" companies offering to set up Personal Service Companies or put you in a special 'scheme' are wide open to attack by the Revenue under the new guidelines, and it is unlikely that the major agencies would deal with them.
Remember, if they don't have Accountancy in their name they probably aren't Accountants.
Special update: SJD become the first and currently only firm of accountants to have been reviewed and found to be fully compliant with all Managed Service Company (MSC) legislation by KPMG.
Contracting through your own Limited Company
It's often said that contracting through your own limited company is a daunting task. In fact, nothing could be further from the truth.
Administering your own limited company, with the support a dedicated firm of accountants like SJD Accountancy, is simple, efficient and inexpensive.
Contracting through your own limited company does require a little more work than using an umbrella company, you'll need to form a company which will just take five minutes - you can form your company and check name availability here, open a company bank account (we can help with this), send in a spreadsheet each month (just like using an umbrella company) and from time to time send cheques off to the Revenue, again we will help you to understand exactly how much to send.
Benefits of Contracting through your own limited company:
- The most tax efficient way of working, meaning you will take home more money (as much as £15,000 more on a £350 daily rate compared with using an umbrella company).
- Claim a wide range of expenses - accountancy fees, equipment, software etc.
- Access to the Flat Rate VAT scheme.
- Even if inside IR35 it may still be worth it, call us to find out by how much (0500 152 500)
- You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator.
- Running your own business isn't difficult; submit spreadsheets to your SJD accountant - just like Umbrella time sheets and expenses.
Downsides
- There is a certain amount of paperwork involved, usually about 10 - 15 minutes per month.
Using an Umbrella company
An Umbrella service is where you are essentially an employee of the umbrella. The way it works is that your client or agent enters a contract with the umbrella for your services, and you enter into a contract with the umbrella.
For details of our award winning umbrella service click here.
Benefits
- Very easy to use, you simply enter your timesheet and expense details and wait to be paid.
- All tax and NI is deducted before you receive your money, so you will have no further taxes to pay.
- Ideal if your contract is less than three months.
Downsides
- You will receive a salary that is subject to full PAYE Tax and NI, it's just like being a permanent member of staff again.
- You are reliant on the umbrella company to collect your money from the client or agent and then to pay it on to you.
Following the April 2007 Budget it is no longer possible to operate through a Composite/Managed Service Company. You must operate either through your own limited company or through a PAYE umbrella company.
About SJD Accountancy
We provide proactive tax advice and accountancy services for contractors who choose to work through their own limited company - all backed up by our unique money-back service guarantee.
With a regional structure in place that covers the whole of the UK we are able to offer a truly 'local' low cost service wherever you happen to be based. We don't outsource and we don’t use agents, so you can have unlimited access to your SJD accountant by phone or email – or you can meet with them face-to-face in any city in the UK. Click here for an interactive map showing all our offices
SJD’s fixed monthly fee includes the following:
- Year end accounts
- Payroll bureau
- Dividend administration
- Dealing with Inland Revenue and Companies House
- Completion of VAT returns
- Completion of Annual Return
- Personal taxation
- Free bookkeeping software
And at £95 plus VAT we are also one of the lowest priced in the market.
We have a vast amount of experience in forming new limited companies and in dealing with newly-formed limited companies. We also have an online company formation facility and we are very happy to assist and guide new clients in all aspects of the administration and accounting requirements of their new companies.
SJD has an enviable reputation and have won more awards for customer service and accountancy excellence than any other firm in our market. Awards include: Accountancy Excellence from Accountancy Age, Best Contractor Accountant as voted by visitors to Contractor UK (UK's largest contractor website), Sunday Times Awards and various National and Chamber Business Awards. We are also a Quality Accountant as deemed by the UK's largest Contractor and Freelancer trade body the PCG plus we have more qualified staff than any other specialist firm with qualifications covering: ATII, ATT, ACCA, CA, ACA, FCCA, ACMA.
If you wish to appoint us as your accountants immediately, the quickest and easiest way to do so is by accessing our Client Agreement Form.
You may also find the following pages, guides and case studies useful:
Take home pay calculator - How much could you be taking home
Contractor FAQ - All your frequently asked questions and their answers
First time Contracting or Freelancing? - A summary of the alternatives along with pros and cons
Step-by-step Guide to Contracting - Download a FREE copy of our guide
Limited or Umbrella? Can't decide? - We help you decide which is best for you
Take home pay case studies - Examples of contractors using a ltd co. & umbrella co.
Expenses Guide - Know exactly what you can claim
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35
If you have any question about contracting or would like any further advice please call our New Client Services Team on 0500 152 500 / 01442 232700 or e-mail rachel@sjdaccountancy.com
You'll be surprised how little time it takes and just how easy it is.
And most importantly, in a recent survey 98% of our clients rated SJD as 'better than other accountants' - we are working hard to convince the other 2%!