First Contract

[root]

For £1,000 a month it's not worth going for an umbrella company as they will milk a huge chunk of that out.

I mean you setting up your own company and taking money from that, (i.e. exactly the thing that IR35 was devised to stop the abuse of)

The question is Sole Trader or Ltd.
Ltd I believe I just pay corp tax as I will pay myself in dividends so I don't have to register for PAYE. But this may need an accountant at £50 - £120 a month to manage, which is a lot out of my small earnings.
Sole Trader, I just don't understand how I pay tax, is it a tax return at the end of the year?

if you paid yourself minimum wage and took dividends then you might find yourself attracting the wrong kind of attention, you must make sure you fall outside the scope of the IR35 laws.
(remember that you still need to pay company taxes and dividends are taxed as well after they exceed your personal allowance and tax band allowance)

Being a sole trader, and just getting paid is nice and easy, (though does nothing to minimise tax)


I.e you do work,
you get paid.
you give some of that to the government
the amount that you give is dependant on how much you've earned,
and set by your tax band

for the sake of £1500 I'd go the sole trader route and be happy at that.

of course if you get 5 "days" a week every week 52 weeks of the year then you'll suddenly find that you earned £75,000 from your part time job.

you'll need to pay the 40p rate AND you'll loose entitlement to certain state benefits, (e.g. child benefits).
in fact whack that 75K on top of a 35k days job salary and you'll be paying £0 on the first 10k, 25p per pound on the next 25K (10k - 35k) then 40p per pound on the amount from 35k - 100k then 50p per pound on the rest...

(110k earned)
25,000 * 0.25
65,000 * 0.4
10,000 * 0.5
===========
~£37k

realistically, what do you think you'll end up getting in a year, (this would probably decide your route for you.) when you start earning that much money paying thirty five thousand pounds in tax, that's when you start feeling that you work really hard so you'll go to a clever accountant to minimise your tax burden.

(and if you're working 8 hours at work, then 4 hours at home in the evenings, then 8 hours a day weekends as well, then why shouldn't you try to minimise your outgoings?)

 

[ssc456]

I mean you setting up your own company and taking money from that, (i.e. exactly the thing that IR35 was devised to stop the abuse of)


if you paid yourself minimum wage and took dividends then you might find yourself attracting the wrong kind of attention, you must make sure you fall outside the scope of the IR35 laws.
(remember that you still need to pay company taxes and dividends are taxed as well after they exceed your personal allowance and tax band allowance)

Being a sole trader, and just getting paid is nice and easy, (though does nothing to minimise tax)


I.e you do work,
you get paid.
you give some of that to the government
the amount that you give is dependant on how much you've earned,
and set by your tax band

for the sake of £1500 I'd go the sole trader route and be happy at that.

of course if you get 5 "days" a week every week 52 weeks of the year then you'll suddenly find that you earned £75,000 from your part time job.

you'll need to pay the 40p rate AND you'll loose entitlement to certain state benefits, (e.g. child benefits).
in fact whack that 75K on top of a 35k days job salary and you'll be paying £0 on the first 10k, 25p per pound on the next 25K (10k - 35k) then 40p per pound on the amount from 35k - 100k then 50p per pound on the rest...

(110k earned)
25,000 * 0.25
65,000 * 0.4
10,000 * 0.5
===========
~£37k

realistically, what do you think you'll end up getting in a year, (this would probably decide your route for you.) when you start earning that much money paying thirty five thousand pounds in tax, that's when you start feeling that you work really hard so you'll go to a clever accountant to minimise your tax burden.

(and if you're working 8 hours at work, then 4 hours at home in the evenings, then 8 hours a day weekends as well, then why shouldn't you try to minimise your outgoings?)

root, thank you again for your sound advice!

Honestly for the first couple of months I expect to maybe earn between £300 and £900 a month purely because even if the work if there I don't intend of exhausting myself working my day job from 6am - 7pm and then doing 4 hours on top of that every night. So a target of 3 days spread out over the month is idea at the minute.

I think i'm going down the Sole Trader route, if it does come to the stage where I look to give up my day job and try and get at least 10 days a month contracting I think I will look at Ltd but for now I should be ok as a Sole Trader.