Getting paid through Umbrella or Limited Company? What is best?

Let us assume that you work as a contractor through an agency and you get paid £30,000 per year. How much tax will I have to pay as an employee through the Umbrella, and what tax will I have to pay if I setup my own Limited company.

 

Working as employee under Umbrella:

Salary                                                                                                            £30,000

Less Personal allowance                                                                           £11,000

Taxable income                                                                                           £19,000

Income Tax 19,000*20% =                                                                          £3,800

Ni tax 21,940*12%=                                                                                       £2,632

Total Tax paid £6,432

Taken home after tax                                                                                £23,568

 

Working as Limited Company:

Income                                                                                                          £30,000

Less Salary                                                                                                    £8,060

Net Profit                                                                                                      £21,940

Assume no expenses to charge

Corporation tax 21,940*20%=                                                                    £4,388

Retained profit                                                                                             £17,552

Take all as Dividend

Tax payable 17,552 less (5000+2,940) £9,607

Tax payable on Dividend £9,607 * 7.5%=                                                  £720

Total Tax paid £4388+720 =                                                                       £5,108

Taken home                                                                                                £24,892

 

Total tax saving as Limited Company £6,432 – £ 5,108 =       £1,324

 

Don’t forget under the company there will be some expenses which this will reduce corporation tax even further.

To discuss how Accountants in Slough can assist you with your Accounts Preparation, please contact us for a free, no obligation consultation on: 01753 373 505 or complete our Contact form and we will get back to you.

 

 

 

Published On: January 1st, 2017 / Categories: News /

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To discuss how Accountants in Slough can assist you with your Accounts Preparation, please contact us for a free, no obligation consultation on: 01753 373 505 or complete our Contact form and we will get back to you.

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