Contractor TAX!!!


DW Member ++
Nov 5, 2005
Reaction score
Employer NI paid to HMRC
Admin fee to Umbrella Company
Tax deducted
Employee NI

The above is what is taken from the funds sent to my umbrella company.

Many contractors I speak to use limited companies to reduce tax and get out from paying employee NI.

Just wanted to know what other contractors are doing and if you are also having your own limited company, from whom and how did you set it up and how would I go about it?

You will have the hassle and cost of running a limited company - company house fees and formalities, preparation of accounts, costs of doing CT returns. Have you seen an accountant yet to find out how much this is all going to cost? Is your employer going to pay you anything more to compensate you for the hassle?
You will have to prepare SA returns (as a company director) if you do not do so already.
You will have to run a payroll - more potential income for your accountant or a payroll agency if you do not want the fun of doing it yourself.
There may also be other issues depending on exactly what you are doing eg re insurance.
You may also want to think about using a solicitor to make sure that any contract you have with your current employer is legally watertight & protects you against all eventualities. More cost of course.
I am sure there are some upsides though!

in other words you need to be comfortably earning over 6 figures a year to even think about it