The Freelance Thread (Contractor, IR35)

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  • There wasn't a thread so I made it.

    This is my question to begin with; what Indemnity liability and Public liability insurance do I get? Does anyone have one that they'd like to refer?

  • I use QDOS

    Seem fine, they were the cheapest I could find 8 years ago, might not be now though of course

  • I think I might be doing freelancing wrong. I got the impression that you pay a bit less tax than under PAYE, but as far as I can tell I'll be paying more.

    I'm a limited company, and I'll have to pay 19% corporation tax + income tax on the rest, right? Or am I missing something staggeringly obvious?

  • Dividend tax doesn't equate to income tax. You pay the corporation tax, then let's say the personal allowance has been used up by taking a gross salary of £11,000. And let's say the rest of your income is dividends. The next tax band to consider is the basic rate tax band from £0 to £32,000. Dividends falling within this band are taxed at 7.5%. But the first £5,000 within that band are not taxed at all, due to the Dividend Tax Allowance (DTA) of £5,000 - so only £27,000 of the £32,000 is taxed at 7.5% (£2,025).

    Any dividends income falling in the higher rate band (currently from £32,001 to £150,000) then attracts the 32.5% higher rate of tax. Then any dividends in excess of £150,000 are subject to a rate of 38.1%. Dividends do not attract employer NICs, so you may decide to pay yourself entirely in dividends instead. Although an ~£11k salary can provide some flexibility at low cost.

    Actually, sorry, the DTA has been reduced to only £2k now and my tax bands above are outdated. Do your calculations for the new tax year here:
    https://www.itcontracting.com/calculator­s/dividend-tax-calculator-2018-19/

  • That's really helpful, thanks. I also have some PAYE income and income from a couple of other sources so I need a proper accountant to sort all this out.

  • ta! Went with Hiscox in the end .. £415 for a year

  • this is exactly what i found as a LTD company , plus the cost of an accountant too as i couldnt figure it all out myself.

    never again as a single person LTD company.

  • so I need a proper accountant to sort all this out.

    Yes! Worth a read: https://www.crunch.co.uk/knowledge/tax/g­et-ready-for-end-of-tax-year/

    Want me to send you a referral code for Crunch? ;)

  • never again as a single person LTD company.

    Could you elaborate pls?

  • Some other things to consider:
    The flat rate VAT scheme can be an ~8% increase on your income (depending on the particulars).
    You can use business expenses for consumables/accountant/equipment/office/­travel/hotels/etc.
    You personal liability will be protected in the event your LTD company gets into trouble.

  • would you recommend getting income protection and/or contractor sick pay cover?

  • I used to have it, then I started working in Sweden/France and I discovered I was no longer covered via the LTD company in the UK, so I cancelled it all.

  • did you ever use it?

  • No and in hindsight I should've made a claim once, but forgot to use it (only 1 day, but still).

  • Now then the big one; IR35 ..

    I have been here for 2+ years, the only way to stay and be IR35 compliant is either go perm (lol) or umbrella in the most linear way.

    In a non-linear one I am thinking going 4 days and do 1 day somewhere else ..

  • I dont think you need to worry. I have know people who have contracted 8+ years for the same company

  • My understanding is you cannot put travel expenses through your company after 2 years

  • Thanks, but my dad's partner is an accountant so will speak to her. Also I couldn't tell if Crunch can handle the tax side of having additional PAYE income, for example.

  • they can but if you know someone its defo better that way .. being me, I don't know anyone plus the millennial in me prefers less human contact

    do you do x days on limited and x on PAYE?

  • I'm on a zero hours contract at company X who pays me via PAYE. I just worked out what I've earned (gross) this tax year and it's a good amount.

    Then I bill all other clients thru my LTD, which is still in its first year of trading so I've not really done anything except save all my documents as I go. Not taken any money out either, as I have my PAYE income for that.

  • you should take the £8424 from limited per year as salary at least .. rest what @JonoMarshall said plus talk to accountant asap

  • Yeah sure - its all my own personal experience but for a single person company - by the time i also factored in insurance, plus having to sort out pensions ,monthly PAYE ,monthly NI calcs and paying HMRC, and various other stuff - especially keeping receipts , and it seemed after the first year including corp tax, dividends, paying myself i didnt get the $$$ i was wanting out if it, and i just got overwhelmed by the "paperwork" and stress of it all - decided to wind up the company which also was a bit of a mare too - you have to inform everyone under the sun your closing, do some final accounts, pay lots of things off, wait 3 months then close it.
    i have to admit my accountants were not very good - there were a few times i got letters from HMRC about not filling in something or expecting something and had to prompt them to do it - so that added to the stress.

    EDIT: also - i'm not the sharpest tool in the box when it comes to figures and tax

  • am I missing something staggeringly obvious

    Company pension contributions to your personal pension.

    And

    If you have another source of income you can chose to take earnings from year X in year Y when maybe you don't have the other source of income anymore.

  • This I could never figure out .. total n00b about this, enlighten me.

  • When Corbyn is ruining I mean running the show this will all be stopped so it's hardly worth it.

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The Freelance Thread (Contractor, IR35)

Posted by Avatar for amey @amey

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