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Temporary contracts and wage allowances - Newbie Q

Hi All,

My wife is about to work as a contractor and is looking at setting up a company (based on advice she has been given) but allowing a 3rd party company to handle her Tax/N.I.

She has a quote (and a comparison vs PAYE) but I'm a total newbie to all this, so I'm after some advice on whether things sound correct. I have a few questions about the figures which she has been give. Any advice you can give is greatly appreciated. I will give the figures for weekly pay.

Hours per day = 7.5 Rate = £10.80 / hour = £405 per week

They take their admin fee off of £35 before tax, is this normal (the fact it comes off before tax)?

Non billable expenses comes to £68 (40p per mile for 50 miles = £20 plus £47.50 per week subsistence) Are these correct/allowable? She's never claimed mileage or subsistence before! This is also removed before tax.

NI removed at £12

This leaves £290, but they've listed her taxable gross as £189. How is this calculated?

Then her profits are £101 (290 - 189 I guess?) again, how do they arrive at this?

After corporation tax of £19, it leaves her with £82 profit which apparently can be taken home??

Will there be any other fees/charges/taxes she's likely to pay at year end? Will it trigger self assessment??

Sorry for the long post and total naivety, I just want to be clear before she signs on the dotted line.

Many thanks for reading Bob

Reply to
Bob
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£1820 per annum seems bloody steep to me. A friend of mine pays £60 per month on a much higher houly rate, in fact £35 per week is f**king extortionate.

Kevin

Reply to
kajr

Do you mean as a Limited Company director?

Or do you mean Trading As Self Employed (they are not ths same)

Yes. It's a charge to the company. It will be a per payroll or invoice charge. You can save money by being paid monthly. Can you afford to do this?

Does she do 50 miles? Assuming that she is classed as a worker at a temporary location, home to work travel is allowed.

To get subsistance you need to be out of the house for a certain number of hours. The more hours the more you can claim. But I forget the actual numbers. 9.50 pd seems reasonable for 9 hours, but it might not be correct.

There would be no point separating it out if it was paid as taxable.

Employers or employees.

It looks too low for the employers NI.

They've made it up.

Actually it's about 37.5* minimum wage. But as your wife is a principal of the company NMW doesn't apply.

Is another lot of NI removed?

290-189!

As long as the Tax/NI taken off the 189 is correct and (assuming a Ltd Co) the paperwork for the dividend payment is in place then no.

Being the principal of the company will do this all on its own.

Reply to
tim (moved to sweden)

In message , "tim (moved to sweden)" writes

But the taxable £189 could easly be the £290 less her tax allowance.

Reply to
john boyle

In message , Bob writes

Yes, no problem with that. You certainly dont want it knocked of AFTER tax!

You seem to be confusing the profit and tax on the company and the money paid to her by the company as an employee.

When you said 'her profits' above, you really should have said 'the company profits.

All those deductions for travelling are, in effect, deductions so as to reduce the taxable profit of the company, they are not 'real' deductions at all.

It seems to me the company will receive £405 from which the £35 is deducted leaving £370. Your wife is paid £290 of which only £189 is taxable. In addition she claims travelling and mileage off the company of £68. So she gets £290+£68 less tax on £189 and NI.

The company makes a taxable profit of £370 - 12 - £68 - £290 which means taxable profit of company = nil & Corp tax payable NIL.

The NI figure seems wrong but Ive left it as you have said for simplification.

Reply to
john boyle

Maybe, but having read your other answer, I still like mine.

But we need the other deductions to tell as the NI is definately wrong.

tim

Reply to
tim (moved to sweden)

Hi All,

many thanks for your valued input. Below, I have pasted the calculations sent to her by the people who were to set up her company info etc, the NI is listed in there, and I hadn't noticed that it wasn't right (the table lists Er's NI and EE's NI.)

Also, for your info, if it helps, she has been told by the company setting her up, that she will be given a company number by the said handling people, and she will effectively be an employee of this company number (although, I don't understand who owns the company?)

Again, if I've left any loose ends, please let me know. As I've stated, I'm not sure what information I need to give you in order for you to help. I appreciate you bearing with me :)

The table below looks a bit dodgy on my machine, but if I copy and paste it back to a text editor, it formats ok.

Thanks again, Bob

Assumptions Standard single person allowance

5 working days per week 52 weeks per year Rate of £5.05 per hour paid by Powerhouse Variables Hours per day 7.5 Rate per hour £10.80 Contract or PAYE rate Contract Non Billable expenses per week £67.50 Weekly Monthly Annually Weekly Monthly Annually Calculation

Net Contract Income 405 "1,755" "21,060" 405 "1,755" "21,060" less Admin Fee 35 152 "1,820" 0 0 0 Non-billable expenses 68 293 "3,510" 0 0 0 Er's NI 12 53 635 35 153 "1,835" Taxable gross salary 189 821 "9,848" 370 "1,602" "19,225" Profits before tax 101 437 "5,248" 0 0 0 Corporation Tax (19%) 19 83 997 0 0 0 Profits after tax / Total Net Dividend 82 354 "4,251" 0 0 0 Gross Salary 189 821 "9,848" 370 "1,602" "19,225" PAYE 16 70 839 56 242 "2,902" EE's NI 11 48 574 21 91 "1,093" Net Salary 162 703 "8,435" 284 "1,229" "14,746" Net Dividend 82 354 "4,251" 0 0 0 Expenses 68 293 "3,510" 0 0 0 Total take home 311 "1,350" "16,195" 284 "1,229" "14,746"

Reply to
Bob

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