Contractors – Sole Trader or Ltd company?

A quick ask if I may; Mrs K has secured some contract work, and in my limited understanding she’s better off registering herself as a Limited company because our assets e.g. house are not liable.

Is this correct and is Limited the way to go? Or, what’s best?

Thanks.

Liable against what? She should have liability and indemnity insurance. I suppose it depends on the work but is someone suing her likely? IME contactors go ltd because the employer requires it or for the tax benefits. Neither appealed to me so I’m a sole trader and have been for many years. Its much simpler.

Well I don’t know, that’s the point. She’ll be working as a computer consultant from home, loading data and configuring software with some end user training.

You may find the company who’ve ‘contracted’ her have an opinion.

If it’s short-term (and due to IR35) she may be better looking at an Umbrella approach.

For the 18 months I did contract work I went umbrella. Much more straight forward.

As I understand it, being a company brings a lot more legal requirements, but properly separates personal assets.

There’s also tax and national insurance benefits both ways, in terms of what you have to pay but also what state benefits you may get back.

I’m assuming you’re taking proper legal and financial advice as well as asking us.

Is it through an agency, or direct?
Not many companies will employ a sole trader for this sort of work.
Having said that the costs involved in a ltd may not be worthwhile for a short term/lowish paying contrac or one-off contract.
Can she not ask for a paye fixed term contract, probably most efficient if this is a short term one-off, the tax advantages aren’t huge these days.

Is it through an agency, or direct?

They are insisting on using the Upwork website is what they use to recruit and escrow.

I’ll look into the umbrella option, but I’m not sure thats a choice with Upwork in mind.

I started off as a Sole Trader for a few months but then went Ltd. I like the separation and personal assets are protected. But I also have public liability and professional indemnity insurance for peace of mind.

Takes a bit of admin and use the services of an accountant once a year for filing the numbers with HMRC, etc but that doesn’t cost much.

with some end user training.

Just checking, I presume that is remotely, eg zoom. Having people round to your house will not be covered by household insurance and is probably one of the risks where you could get sued if they have an accident.

Upwork looks more like a marketplace for proper short length contract work.
If that’s the case then the work ‘looks’ like it could be outwith IR35 so an Umbrella isn’t necessary but could be simpler.
There’s a bit of admin with a ltd co, but it’s not onerous and you don’t now need an accountant.
I’d probably go down the Ltd Co on that basis, but it’s hard to know without better understanding what the work is, how it’s structured and how they plan to pay.

It will be your client, and HMRC, that will decide if you get paid PAYE or to your Ltd company. Inside Vs outside IR35.

Rushi Sunak had a budget a couple of days ago
https://www.contractoruk.com/news/0014953budget_2021_rishi_sunak_omits_ir35_even_hmrc_eyes_ps15billion_extra_off_payroll_reform_2024_26.html

If it’s fixed price, through upwork, you might be able to go Sole Trader.

If there’s any chance of comeback wrt to warranty on the work, you are better off using an umbrella or ltd co.

Most big companies won’t take on a sole trader for contract work as the if the sole trader doesn’t pay their tax / NI the big co is responsible for it.

My experience was that LTD made a lot of sense (more tax efficient) when there was good money coming in, and we were working with household-name clients who wanted us to be LTD anyway.

For a low volume of work, I’d have stuck with sole trader. Much less admin work & costs.