Contractors in the film and TV industry work in all areas, as sound and visual engineers and other on-set services…
If you are a Contractor in the film and TV business you may be better off working through your own Limited company rather than working through your agency’s books or joining an umbrella company.
At Clearways Accountants we can tell you that working through your own Limited company is the most tax efficient way of taking on contracting work. Your company’s profits will be taxed at 20% per annum no matter how much the company earns and depending on how much you take out of the company you may not pay any further tax (please see articles on the new dividend tax rate as this may not always be true).
There are a number of benefits in being a Contractor:
- There is constant demand for the services you provide in the media sector so you will never be short of work;
- You have the freedom to work where you want;
- You have the freedom to work when you want;
- You can take on long or short-term opportunities – to suit you;
- You have opportunities to expand your skills and;
- Generally Contractors have higher rates of pay (than employees).
You can also save on National Insurance
When you are enrolled on your agency’s books or if you work through an umbrella company you will pay both employer’s and employee’s national insurance out of your day rate (the employee rate is 12% for amounts between £155 – 815 per week and employer rate is 13.8% on all income over £156 per week in 2015-16). If you contract through your own Limited company you could save the following amounts of National Insurance per day.
- At a day rate of £200, save approximately £41 per day in employee’ and employer’s NI (£9,635 for a 5 day week, 47 weeks a year);
- At a day rate of £350, save approximately £64 per day (£15,040 for a 5 day week, 47 weeks a year);
- At a day rate of £600, save approximately £104 per day (£24,440 for a 5 day week, 47 weeks a year);
- If you work as a Contractor through your own Limited company you will be able to deduct travel costs from your day rate (although see our article on the 24 month rule if you take a long contract).
There are also some downsides to working through your own Limited company:
- You will have to be a director of your own company with more responsibilities than just being an employee;
- You will no longer benefit from your employer’s contributions to your pension fund;
- You will need to be organised to invoice your agency, collect the fees and check your company bank account;
- You will need to keep back some money to pay your company tax bill; and
- You will probably need to take out professional indemnity insurance. Contractors in the film and TV industry working in the media as sound and vision engineers should register for VAT and join the Flat Rate Scheme – you may find there are even more savings to be made.
- Although the administration can seem daunting, it really isn’t – most professionals find that they can complete the necessary monthly record keeping in less than an hour a month.
If you would like help in setting up your own tax efficient contractor Limited company servicing the film and TV industries, then please contact Clearways Accountants using the email form below or call us on 01737 244298.