Hi – possibly looking at working as a self employed consultant, and just trying to figure out everything I need to know. Liklihood is for short term (2-3 month) contracts for specific outcomes in a fairly specialist field. Ideally I would also not want to touch any income this tax year, so considering a Ltd co as the easiest option, and earnings can simply sit in the company account. Unlikely to earn over the VAT threshold this year, although not impossible.

So my questions are – do I have to worry about IR35? Are there any suggestions to calculate a day rate other than using my previous salary and adding a contractor risk? Why would I want to consider an umbrella rather than my own company?

If I go the Ltd route I would probably get all the basics from an accountant (setting the comapny up, getting a bank accounts etc), unless people think there may be a better way.

Cheers!

Bump in case this is still a thing?

http://www.contractoruk.com for all your questions and answers.

First timer guides good too.

If you have multiple clients, don’t use their equipment or work to their hours etc IR35 less likely to be an issue.

Have your own professional indemnity and business insurance.

Don’t avoid income tax. Although if you buy a new electric car you probably will as you can offset them 100% against income. Weird.

I think that’s my sum total knowledge and that’s coming up 4 years of providing random advice to strangers.

If it’s 3 months, don’t bother setting up a LTD. Just go Sole Trader, all you need to do is invoice your clients, get paid money and keep some money aside to pay tax.

Keep your invoices in, and then just submit at TYE next year.

Oh, and this

Have your own professional indemnity and business insurance.

If it’s 3 months, don’t bother setting up a LTD. Just go Sole Trader, all you need to do is invoice your clients, get paid money and keep some money aside to pay tax.

I read the OP that each contract would be 3 months, then move on to a new contract (& customer?) Rather than a short term thing.

https://www.simplybusiness.co.uk/knowledge/articles/2021/02/what-is-ir35-guide-for-the-self-employed/

MOO

Have you practiced borrowing someone’s watch, telling them the time and then charging them a fiver? 😉

so considering a Ltd co as the easiest option, and earnings can simply sit in the company account.

limited companies also pay tax – so any money you leave in the business will be taxed

I don’t think it’s the tax dodge you think it is and your accountant will advise re ltd/umbrella etc, needs to be a pretty good day rate to make ltd worthwhile. The glory days of contracting have gone apparently though due to ir35

I don’t mind paying tax, but this year any earnings to me personally will be at the top rate due to redundancy, and I don’t need the cash this year. Next year my earnings will be much much lower I suspect (possibly close to zero), so my thoughts were pay the corporation tax on the profits in a Ltd and then draw on that as earnings in the future (and pay whatever tax is necessary).

needs to be a pretty good day rate to make ltd worthwhile

It will be well into the hundreds, so hopefully.

I read the OP that each contract would be 3 months, then move on to a new contract (& customer?) Rather than a short term thing.

This is correct.

And thanks for the links – some good stuff there

Lots to go into (was sole trader, then Ltd company, now employed – yuck)

IR35 killed it for me, thing is I was not a employee in disguise but actually invested a lot of my profit into R&D and equipment and took on research contracts with MoD and funding bodies but everyone got scared of the risk and just declared contracts inside IR35. On £500 a day that was £900 a week in tax.

Currently employed but hate it and trying to get out.

Anyway, what I came here to say is if you dont “need” the money then either put it in the company accounts for when you do but you will need to pay corporation tax OR put it in your pension. I still have reserves from when I was consulting so put 30% of my salary into my pension. I try and balance it so I take home just what I need. If I want to buy anything out of the ordinary I dip into my reserves.

When doing your calcs OP don’t forget that the first £30k of redundancy or severance pay is not taxed.
https://www.gov.uk/redundancy-your-rights/redundancy-pay

If you do go Ltd then you (aka your company) will pay corporation tax (21% IIRC) on any profits.

So might be worth making employer pension contributions to reduce this liability i.e. don’t make a profit.