It can be a difficult decision deciding to stop working as an employee for a company and set up as a contractor through your own limited company.
Some of your work colleagues may be telling you how much better-off you could be but still you wonder if it is the right thing to do?
Clearways Accountants has come across “wannabe” contractors going through this dilemma before and to help you make your decision here are some thoughts:
- No employment is secure, you may be on one month’s notice as a contractor and three months as an employee but companies change their plans and relocate offices without a second thought. If you think your employment is safe, then maybe you should think again.
- Your employer makes pension contributions to your personal scheme and you are worried that you may be better off now with a contract but may be poorer in retirement? Many employees are members of their employers’ money purchase scheme. If this is the case your contractor company can make pension contributions directly to your pension scheme. If you have a final salary pension scheme, you are lucky, in which case your decision will be harder and may depend on the number of years’ service you have to complete before you reach your maximum pension.
- You receive childcare vouchers to help with nursery fees. Your contractor company can set-up a childcare voucher scheme and as you will have a low salary (remember you take most of your money from the company as dividends) you will receive the maximum available of £55 per week. As a well-paid professional your childcare vouchers as an employee will be worth less.
- Your lunch will be a tax deductible company expense and your mobile phone contract can be transferred to the company and this will also be a tax deductible company expense.
- Your commuting costs will be tax deductible if you work through your contractor company but not if you are an employee.
To check the maths and compare your salary with your expected contractor earnings go to this blog.
If you would like more personalised advice on whether contracting is the right decision for you, then please call Clearways Accountants on 01737 244298 or complete the contact form below.