What’s right for you?
In order to decide you need to consider the benefits of working through a PAYE umbrella company, such as Focused compared to setting up your own Personal Service Company (PSC), which we can also help you with. It’s your choice but our helpful team of advisors are on hand if you want to talk through your decision or ask any questions.
First let’s look at the umbrella option.
The umbrella option may be best for you if you would like:
- One employer whilst you are contracting
- A quick and easy payroll service
- Access to a pension plan
- To build up an employment record for the purpose of mortgage applications
- The benefit of continuous employment, without setting up a limited company.
This route allows you to operate in a legally tax efficient manner, without having to worry about IR35 rules or end of year accounting responsibilities.
As a Focused employee we do all the invoicing, chase agencies for payment, provide the necessary insurances and calculate your tax and NI deductions on a pay as you earn basis (PAYE).
We also offer you full employment rights including holiday pay, maternity, paternity and sickness benefits.
Let’s now see how this compares with the limited company option.
This route requires you to be the director of your own company (sometimes referred to a Personal Service Company or PSC). This is a legal status allowing ‘the Company’ to contract out your services to agencies / end clients.
Through this structure legitimate business expenses are reimbursed for things like travel, subsistence and home office costs. As the sole employee you will be paid a salary and then as the director you will receive dividends, which are free from NI.
This is a legally tax efficient way to operate as a contractor but there are considerations:
- You will be required to produce detailed annual accounts
- You must keep accurate invoicing and VAT records
- You will be responsible for submitting corporation tax returns and paying the tax owed
- You must submit an annual tax self-assessment form to declare any dividends received and pay any additional tax liabilities on these dividends
- You must ensure that you’re on the right side of the law in relation to IR35
- You must manage a separate business bank account
- To avoid penalties you need to file returns within HMRC or Companies House deadlines
- And finally you must respond to communications from a number of authorities.
Whilst this may all sound daunting it remains a very popular option with professional contractors and with Focused by your side you can relax in the knowledge that we’ve got your back and the benefits are there for you if you:
- Tend to work on multiple projects or are a long term contractor with a number of contracts
- Want to work in the most tax efficient way possible
- Fall outside IR35
- Want complete control of your finances
Our all-inclusive accountancy service can help you set up your limited company, complete all the year-end returns, run your company’s payroll and hand hold you throughout your trading in all matters relating to your accounting and tax affairs.
Still not sure? Our teams would be more than happy to discuss this with you in detail contact them on 01732 897 549 or firstname.lastname@example.org