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FAQ - Page 1

How much money will I be able to take home as a contractor?

If you are contracting through your own limited company your take home pay will be anywhere between 75% - 85% of the contract value, for example:

Daily rate of Take home pay
£200 Between £150 and £160
£300 Between £225 and £240
£400 Between £300 and £320
£600 Between £450 and £480


If you contract through an umbrella company then your take home will be around 60% - 65% of the contract value. Below is a simple comparison of Ltd vs Umbrella:

Daily Rate of Umbrella Company Monthly Take Home Limited Company Monthly Take Home Difference between Umbrella & Ltd Co.
£200 £2,700 £3,400 £700
£300 £3,900 £5,000 £1,100
£400 £5,100 £6,500 £1,400
£600 £7,300 £9,500 £2,200

These figures are approximate, to discuss your exact contract details simply give us a call on 0845 834 0269 or email us at info@123contracting.co.uk.

Then main advantages you gain with a Limited Company over using an umbrella are; National Insurance, the Flat Rate VAT Scheme and the benefit of claiming a wider range of expenses.

Remember that everyone's circumstances are different so please contact us for a business review - part of The 123 Way.



What is best for me - Sole Trader, Limited Company or Umbrella?

There is a simple rule – if you are contracting for more than 3 months, or it is your aim to contract for the foreseeable future then generally speaking the Limited company or Sole Trader route is the best way to go. However, as everyone's circumstances are different we advise you have your individual needs and requirements reviewed first.



How do I switch from Umbrella to Sole Trader or Limited Company?

You can switch from contracting through an umbrella to your own Limited Company or as a Sole Trader in no time at all. All you need do is:

1. Fill out our join The 123 Way form
2. We will form a Limited Company for you or register you as a self-employed Sole Trader
3. We will help you open a business bank account

Now you can contract through your Limited Company or as a Sole Trader - easy as 123.

We have strong relationships with HSBC bank in the UK and can have your bank account fast tracked – this saves you time, not having to go into a branch to set up an account and fill out lots of forms.

We can form Limited Companies the same day if needed

If you have any further questions on this, please call us on 0845 834 0269 or email us at
info@123contracting.co.uk



Is there a lot of paperwork involved in running a Ltd company?

Paperwork will take no more than 15 – 20 minutes per month. This includes sending invoices, recording expenses and paying HM Revenue and Customs, if you were using an Umbrella company, it would take around 20 minutes a month as well.



What expenses can I claim?

You can claim anything that is wholly and exclusively for the purposes of your business. This includes numerous things such as accountancy fees, business travel, postage, insurance and salaries.

Take a look at the Expenses pages of the Knowledge Centre for more information.



What if I decide to go permanent?

This is not a problem, we can simply close your Limited Company or make it dormant. If you are a Sole Trader then we will de-register you as being Self-Employed. We will help you understand what’s best for you if the situation arises



Is there a particularly good time to form a Limited Company or become a Sole Trader?

Any time is a good time. It makes no difference which month or at which point in the month you form a Limited Company or become a Sole Trader.

It is better to form your Limited Company or register as a Sole Trader in advance of your contract start date, so you have everything ready and can focus all your energy and time on your new contract. However if you are not planning on working straight away, then you are better off waiting until a few weeks before your contract starts.



Can I still pay myself monthly if I choose the Limited Company route?

Yes you can but, as it’s your company you can pay yourself whenever you like - although most contractors do choose monthly. We will help you to understand your tax liabilities and how expenses affect your tax bill and take home amount.



What are dividends?

Dividends are just a distribution of an Company's profits to its shareholders. You do not have to pay national Insurance on any dividend payments and so this is a very tax efficient way of receiving income. If you contract through an umbrella you can not pay dividends.



How often can I pay dividends?

Dividends can be paid as often as you choose as long as your Limited Company is in profit; we will help you to understand this. As the sole shareholder they are your profits so you can take them when you like, as long as you leave enough money behind to ensure you can meet your tax obligations which we will calculate and explain as well.


Disclaimer:

This information is for general information only. We take no responsibility for any action taken or refrained from in consequence of its contents. Always seek our professional advice specific to your circumstances before acting.