IT Contractor Solutions

There have always been two main soultions to enable you, the IT Contractor to be paid: Umbrella Company or your own Limited Company. Using an umbrella company is simple, just submit your timesheets and expenses and wait for your monthly pay. The downside of the arrangement is the level of return you achieve, maybe 60% of your annual contract value. Used in conjunction with a specialist contractor accountant, a Limited Company set up may give you a return of 70% and in spite of the additional administration involved and possible IR35 complications,the Limited Company option is the most common of the available contractor solutions for payment.

There is, however, an alternative, a specialist contractor solution - the self employed hybrid solution - that is fully compliant with current UK tax legislation (including IR35), has little or no administration and can provide you with a net return of just under 85% of your contract value – and that’s after paying all tax, N.I. and fees. This alternative has the added benefit of a complete accountancy and contractor tax advisory service provided free of charge by Castlemaine Associates.

Call us now on 0870 778 0063 to find out which structure would be best for you.

Self Employed Hybrid Solution

Expected Annual Contract Value
Sole Trader income
Est. Expenses
Tax & Class 4 NICs (approx.)
Net Sole Trader Income
Head Office overhead charge
Loan Received
Loan Interest
Attainable Return (Trust + Income - Interest)
Net Return after all taxes and fees paid

100,000
18,000
5,000
1,000
17,000
15,000
67,000
472
83,527
84%

Ltd Company (Outside IR35)

Expected Annual Contract Value
Output VAT @ 20%
Total VAT Payable
Net Turnover
Accountancy Fees
Elected PAYE Salary*
PAYE Deduction
Employee's NIC Deduction
Estimated Expenses**
Net Salary paid to you
Employer's NIC
Gross Payroll Cost (Salary + Employer's NIC)
Profit
Corporation Tax
Profit after Tax (Paid as Dividend)
Dividend Tax
Balance
Retained Earnings (Salary + Div + Expenses)

100,000
120,000
16,200
103,800
1,800
10,000
505
332
5,000
9,162
404
10,404
86,595
17,319
69,276
10,402
58,874
73,036
73%

* This is a notional PAYE salary to provide an example of
your achievable returns and does not take into account
your IR35 status. Actual salary level decided by client.

** Expenses must be wholly and exclusively incurred for
the purposes of running your business.

Umbrella Company

Expected Annual Contract Value
Umbrella Fees
Estimated Expenses
Available for Payroll
PAYE Deduction
Employers NIC Deduction
Retained Earnings (Salary + Expenses)

100,000
780
5,000
94,220
23,470
5,054
60,129
60%

Call us now on 0870 778 0063 to find out which structure would be best for you.

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