Guide To Contracting

Thinking about becoming self employed? Wondering what you need to do to start? Ltd Vs PAYE?  Get a greater understanding with our guide below

 

Summary

Congratulations! So you have decided to take the leap into self-employment! The idea of greater working flexibility and ‘being your own boss’ can be an appealing thought, but there are also several things you will need to consider and do.

Tax GP are here to help with your accounting and tax needs as well as provide guidance on how best to structure your business to assist you in having a greater understanding (and hopefully payrate) in self employment.

There are many benefits to becoming self employed:

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Financial

Your earning potential is higher as day rates for self-employed consultants and freelancers tend to be much higher than salaries.

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Flexibility

Being self-employed allows you to fit your work around other commitments and responsibilities such as childcare.

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Freedom

Being self employed means you are your own boss. Companies you work for are your clients. This allows you greater freedom to pick and choose which projects you take on, with the possibility of working on  several different projects for different clients at any one time.

Business Structure

What is the right structure for me?

Now that you have decided to become a contractor, the next important step is determining the business structure best suited to you.

What you structure you decide will also determine the type of finance available to you, the way you are taxed and also what reporting legalities applicable. We are Tax GP Ltd are here to guide you and to help make sure you’re as well-informed as possible.

Below are a few of the options available to help provide you with the knowledge of what each structure entails. To discuss the pros and cons of each option as well as  which one would be suit your need, contact us.

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Limited Company

A limited company is defined  as a separate legal entity, set up for the sole purpose of running a business.

During set up (incorporation), a director (you) will be responsible for paying taxes and keeping accounts up to date. 

All assets and properties are registered in the company’s name.

All debts and obligations will be paid by company assets only.

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Umbrella Company

An umbrella company is a separate company that acts as an employer for contractors.

They are usually set up as the intermediatary between the contractor and end client/agency.

An umbrella treat you as an employee and deduct tax at source through the PAYE system.

They will also pay both employees and employers’ National Insurance on your behalf.

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Sole Trader

This is viewed as the simplest to set up in self employment. A sole trader is a person who owns and runs their business as an individual.

Being the sole owner of the business means you will be entitled to all earnings but you will also be solely responsible for any debts that may be incurred.

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Partnerships

A partnership is an arrangement whereby two sole traders choose to work together.

The sole traders will submit their own self-assessment tax returns and pay National Insurance as individuals.

However, the business will be treated as one entity when it comes to VAT registration.

 For further information and details on contracting download our guide below.

More Assistance

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Futher Information

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If you have any other queries regarding annual returns please don’t hesitate to get in touch either via form, phone or email.

We will get in touch with you to discuss your requirements and provide you with a free initial consultation.

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