nsmith said "We are however getting hung up on one feature of an entire package. The big question is how would be best to pay myself. As an employee of the company, on PAYE with expenses, mileage etc on an hourly rate, then take the excess as a dividend at intervals or is there a better way? "
The best way to pay yourself will vary from person to person.
I don’t know what kind of work you do but many agency drivers could be classed as failing the so called IR35 test in which case HMRC COULD ask you for further tax & Ni payments than you may not have initially budgeted for. However many people do not get looked at as HMRC is overworked.
As a limited company you could get an extra £1 to £3 per hour (my experience) compared to PAYE rates but don’t forget that you are losing your holiday pay which agencies must pay thier PAYE workers (28 days or pro rata for part time work).
If you feel comfortable in setting up a limited company after looking at IR35 (look up deemed payments) then that could be a good way. The drawbacks are that if you pay yourself too little and don’t pay any NI then this may affect your state pension. Most times the best way is to pay yourself just enough PAYE (you need to register witth HMRC as an employer) to exceed the secondary earnings level (I think £153 per week) but not enough to attract large NI liabilities as you will, as an employer of yourself, also have to pay 13.8% employers NI contibutions on any wages above the secondary threshold. If HMRC disagreed with your set up you could be liable to pay almost 26% of your pay as both employers and employees NI.
After you have drawn the level of pay that you feel is appropriate then you may look to paying yourself dividends. Dividends can be paid on a weekly/monthly/quarterly/yearly basis but there are certain hoops that you must go through so the dividends are not classed as illegal. briefly they are that you must be solvent before taking any dividend (bearing in mind obligations such as tax due but not paid), you must call a board meeting with yourself to agree the dividend and document the minutes to show this and finally you need to issue yourself with a tax voucher. if you want to use a directors loan account then do not fall foul of the Bed and Breakfasting regulations.
The tax offsets are not as great as some think. You may claim for PPE but very unlikely for (say) trousers, jackets etc especially if they are not logoed as these are usually considered to be available to be worn outside of work. Mobile phones should idealy be in the company name and only a proportion can be claimed for. There are other items but not really any great saving and some could cause complications with mortgage lenders etc.
Lastly you would need to be able to budget for your end of year tax bill, register with HMRC as an employer(■■) and be aware of the time scales for lodging the required filings with Companies House, HMRC and making any payments due. Would you need an accountant (charges likely to be £500 to £1000 per yr)
Lots of people go via the limited company route but I do wonder if they make the savings that they expected. And I do know that many just spend the gross money and end up in a mess. However one of the biggest boosts to Ltd Company earnings would be to register for the Flat Rate Vat Scheme (FRVS). In a nut shell you charge 20% VAT on your invoices but only pay 10% to HMRC but you cannot recalim VAT on your purchases. As your sales (wages) should far exceed you purchases you get in effect a near10% boost on your wages.
If you can work for an employer or an agency on a PAYE basis you have no big bill tax worries you get holiday pay and it is surprising how many items ( such as mileage to a temporary workplace) you can claim for even though you are PAYE – do a self assessment or use form P87)
I would not touch a payroll company as in my limited experience they will charge you a weekly fee and take employers as well as employess Ni from you. The extra hourly rate you may get is not usually compensated for by the loss of holiday pay.
long winded but I hope it gives you some ideas and frankly I would be very surprised if your weekly rate could rise from £500 to £850 just by going limited.