PAYE or LTD for first job?

Hi folks,

Finally got all my cards through after passing class 2 and CPC last month. Just registered with an agency today who think they’ve got a job lined up for me, just waiting for confirmation from the company being that I’m a new pass.

The agency asked me whether I wanted to go PAYE or LTD. I’m undecided. I used to be a self-employed gardener so I know how to do the books, but I don’t want to have the extra hassle unless the benefits are worthwhile. Do expenses claims help bring the tax down and does the extra pay make up for lack of holiday/sick pay etc?

I’m sure it’s down to personal preference but as a newbie I’d appreciate hearing what others think?

Cheers

It depends… Both on what they are offering as PAYE and what they are offering as Ltd. It also depends on you.

I’m pretty convinced that I’m better off on Ltd. I don’t get holiday or sick pay - but I wouldn’t get sick pay either way through any agency I’ve touched.

If you were my mate or family member - i’d say go PAYE for a bit and then reevaluate later.

You are going to be told ‘wait until HMCR catch up with them’ soon - which is possible. But if you google it people have been saying the same thing for about 10 years on here… A few horrow stories which generally involve Umbrella rather than Ltd might also be quoted. Then someone will throw in the gem about it just being an extra £1/hour… Which in SOME cases is true. But I’m certainly earning significantly more than £1/hour over PAYE at the moment.

A bloke called Conor will do the percentage comparison. And he is totally right if all things were being equal. The missing factor is tax there. If you are PAYE and but a new macbook pro you are not going to be saving a large percentage of the price in tax - among other things.

I’d wait until you have found your feet a bit. And work out what is right for you then. Congrats on passing.

Personally PAYE all the way.

Expenses might help, so long as HMRC don’t ask for them back if they decide that your not self employed.

That’s before the issue of potential damages (you are new) comes up

Thanks, I hadn’t considered the liability for damage. I’ve already signed the forms for PAYE anyway, I decided it would be more straight forward for a newbie.

Thanks

PAYE, if anything the fact you get holiday pay is a bonus over LTD

The PAYE comes with 28 days holiday, sick pay after a certain period and pension scheme. I’ve decided to go with the PAYE as I said. I’m new and it’s going to be complex enough adjusting to drivers hours, working hours, reference periods etc without worrying about doing my own taxes too.

This was all before I got offered an interview with a direct employer so if that goes well I might not even end up with an agency.

If you go PAYE with an agency, you will lose £162 of National Insurance tax free allowance for every week that you don’t earn anything. Or the difference, ie. if you earn £100 one week you will lose £62 of the National Insurance tax free allowance for that week. This is separate from the Income Tax tax free allowance, which is £11,850 for the current tax year 2018/19. Everyone gets the full amount of that.

As a LTD company, you get the whole year’s National Insurance allowance of £8424 (ie. 52weeks x £162) for the current tax year 2018/19 providing you pay yourself through the company’s payroll only once in the tax year and it has to be done in the last month of the tax year, ie. 6th March to 5th April. You do have to phone HMRC to let them know that you are going to do this and only company directors are allowed to do this. In the first year of trading you will get this allowance pro-rata ie. if you incorporated your Limited company with just 26 weeks remaining of the tax year you would get 26/52 x £8424 = £4212. You would round up odd days, so 25 weeks and 1 day of the tax year remaining would give you 26 weeks of National Insurance tax free allowance.

As you can see, tax is very easy.

It only costs £12 to set up a Limited company on the government website. Need more information, then there are hmrc helplines that you can phone.

gov.uk/limited-company-formation

carlston49:
If you go PAYE with an agency, you will lose £162 of National Insurance tax free allowance for every week that you don’t earn anything. Or the difference, ie. if you earn £100 one week you will lose £62 of the National Insurance tax free allowance for that week. This is separate from the Income Tax tax free allowance, which is £11,850 for the current tax year 2018/19. Everyone gets the full amount of that.

As a LTD company, you get the whole year’s National Insurance allowance of £8424 (ie. 52weeks x £162) for the current tax year 2018/19 providing you pay yourself through the company’s payroll only once in the tax year and it has to be done in the last month of the tax year, ie. 6th March to 5th April. You do have to phone HMRC to let them know that you are going to do this and only company directors are allowed to do this. In the first year of trading you will get this allowance pro-rata ie. if you incorporated your Limited company with just 26 weeks remaining of the tax year you would get 26/52 x £8424 = £4212. You would round up odd days, so 25 weeks and 1 day of the tax year remaining would give you 26 weeks of National Insurance tax free allowance.

As you can see, tax is very easy.

It only costs £12 to set up a Limited company on the government website. Need more information, then there are hmrc helplines that you can phone.

gov.uk/limited-company-formation

You don’t “lose” any allowance when not working.

It either comes back automatically or you do a tax query. Very easy and all balances at the end of the year

If a driver is paid under PAYE with more than one agency in any one week a driver will get £162 of National Insurance tax free allowance from each agency for that week. So if a driver works one day each week for five different agencies he will get 5 x £162 = £810 of National Insurance tax free allowance. Or 52 x £810 for the year which is over £40,000. Sounds too good to be true, but a driver really can earn over £40,000 each year and not pay a penny of National Insurance if you don’t work for the same agency more than once a week.

carlston49:
If a driver is paid under PAYE with more than one agency in any one week a driver will get £162 of National Insurance tax free allowance from each agency for that week. So if a driver works one day each week for five different agencies he will get 5 x £162 = £810 of National Insurance tax free allowance. Or 52 x £810 for the year which is over £40,000. Sounds too good to be true, but a driver really can earn over £40,000 each year and not pay a penny of National Insurance if you don’t work for the same agency more than once a week.

Right up to the end of the year when they all issue p60’s and HMRC comes calling

At the same time a driver is paying 12% Employee’s NI the agency is paying 13.8% Employer’s NI. So if an agency driver on PAYE works for two different agencies in one week both agencies would want to claim the driver’s £162 NI tax free allowance so that they didn’t have to pay 13.8% x £162 = £22.36 Employer’s NI.