What is the best/quickest way to set up a company to get paid through?

[Scottie]

Hi, just wondered what is the best way to do this...

I am a permenanent employee with one large company and paid on the PAYE system, HR sorts out all tax etc, and I don't have to do self assessment. I am continuing in this job.

In addition to this another company has asked me to do some work for them, so what is the best way to receive payment? If I just take cash as in bank transfer I assume I'd have to do self assessment, declare it and pay a lot in tax etc, can you setup a single person company etc?

[MEL]

I'm a limited company and own 100% as a single majority shareholder. I pay an accountant to process my quarterly vat returns and annual corporation tax paperwork but you could quite easily do it yourself

As long as you have a specific business account separate of what the first company pays into it should be straightforward.

[Scottie]

So I'd have to set up a business bank account, and register myself as a company? What sort of costs and timescales are they? thanks.

[joeshaw123]

You don't necessarily have to do that; if the income is going to be small you can just register as self employed, get a UTR number from HMRC and pay the normal amount in tax/NI contributions that you would if you earned it as an employee.
If you go the company route, you could then take it as a dividend from the company (which you still need to declare on your self-assessment).
If you currently pay 20% tax and the dividend doesn't bring you above that then I don't think it makes much of a difference which way you do it.

It all depends on how much this extra work is going to be bringing in. I'm a design engineer and am salaried at a company, but a company which I previously worked for still subs work out to me. I take payment into my personal account, the same one as my salary goes into, and just keep the invoices so I can declare it at the end of the year/prove it if required. I end up paying the same tax and NI as I would have if I earnt it on my salary; I just put this to one side and keep it for when it is due - I couldn't be bothered to set up a separate account and do the company's accounts/VAT/Corp Tax returns as the extra income is only a small amount.

[Actual_Ben_Taylor]

An umbrella company would probably be the easiest for you.

Essentially they employ you and sort everything as PAYE.

Someone like Parasol or PayStream (I've used them both before)

[Yakko]

Another Ltd company here, I pay my accountant monthly and he sorts out my VAT, corporation tax, personal tax etc. All I have to do is keep a couple of spreadsheets updated.

It took about ten days to get the company registered and the business accounts set up, can't remember the cost, but it wasn't much. I've heard of people speeding this up by using pre registered companies.

It's more tax efficient running as a Ltd compared to using umbrella companies like ABT suggests above, but it is more hassle, admin and responsibility.

[Jonny Wilkinson]

Registering with the tax man as self-employed for a secondary income is the correct way to go. You can call them and ask what the correct procedure is and what the implications are. They'll almost certainly expect you to fill in a self-assessment next year though, even if you decide not to do the work.

You'll also need permission from your main employer to allow you to do the work if you have an employment contract with them.

If you set up a company and so on, you will need to demonstrate where the labour is coming from, register with companies house, register for VAT, get and accountant, pay corporation tax on profits etc. etc..

As the labour to generate company income is coming from you, it will be treated as employment and you will need to pay NI and tax to the taxman for the employment labour and get registered for RTA payroll. Add on accountancy fees and you'll be looking at 700-1000+ per annum.

Using an umbrella company would probably be a bad thing for you as you would need to pay the umbrella company AND still have to pay all the other stuff like NI and tax etc.

[Jonny Wilkinson]

It's more tax efficient running as a Ltd compared to using umbrella companies ...

...once you get above a certain turnover.

[Rubix_Cube]

I may resurrect this thread in a few months... got some good info for me so far.

[Scottie]

Thanks for some good advice.

In case it makes any difference I would pay 40% tax on the earnings, and I am only talking about 20% top up of salary, just a secondary income...to run the sx

[docwra]

...once you get above a certain turnover.

That depends on what you do with your expenses though

[Scottie]

Doc, how would you suggest i set myself up?

[Actual_Ben_Taylor]

It really depends how long you plan to do this.

If it's just a 6 month thing use an umbrella. If this is going to be a permanent arrangement then set up a LTD.

[Cluck]

Registering with the tax man as self-employed for a secondary income is the correct way to go. You can call them and ask what the correct procedure is and what the implications are. They'll almost certainly expect you to fill in a self-assessment next year though, even if you decide not to do the work.

You'll also need permission from your main employer to allow you to do the work if you have an employment contract with them.

If you set up a company and so on, you will need to demonstrate where the labour is coming from, register with companies house, register for VAT, get and accountant, pay corporation tax on profits etc. etc..

As the labour to generate company income is coming from you, it will be treated as employment and you will need to pay NI and tax to the taxman for the employment labour and get registered for RTA payroll. Add on accountancy fees and you'll be looking at 700-1000+ per annum.

Using an umbrella company would probably be a bad thing for you as you would need to pay the umbrella company AND still have to pay all the other stuff like NI and tax etc.

Only one small point, you don't need to register for VAT until your turnover exceeds the current annual threshold of £81000. If you aren't going to be buying a lot of kit then I would argue that registering just adds more 'stuff to do' on the accounts side of things. If you are mostly going to be selling 'you' (ie, your time), rather than physical goods, then don't bother registering for VAT until you have to.

[Vigilant teSte]

I was still officially working for HP when I took Oak Photo from hobby to business. I took advice and registered self employed as a sole trader trading as Oak Photo, then just kept the relevant HMRC dept's in the loop as the HP employment ended. Still a sole trader now, but a lot of photographers are. I know a lot of IT contractors that went the same way, but some use umbrella companies.

I do my own accounts and have a friend who is chartered keep me in check on a quarterly basis

[Jonny Wilkinson]

Only one small point, you don't need to register for VAT until your turnover exceeds the current annual threshold of £81000. If you aren't going to be buying a lot of kit then I would argue that registering just adds more 'stuff to do' on the accounts side of things. If you are mostly going to be selling 'you' (ie, your time), rather than physical goods, then don't bother registering for VAT until you have to.

Its true that you don't HAVE to register for VAT but I don't agree with your advice about not bothering.

If you are selling mostly "you", you can register for a flat-rate VAT. The rate varies by profession and you get an additional 1% off in the first year.

I charge VAT at 20% and pay it at a flat rate of 14.5% (13.5 in the first year) of the grossed figure as I'm in IT. Even on a turnover of 20,000 a year that is 520 quid in my pocket or most of your accountancy bill if you want to look at it that way. You can also still claim back the VAT on large items (over 2K) even if you are using the flat rate for eveything else.

[MEL]

I'm the same as Jonny. Going on the flat rate vat scheme means more money in my pocket

[docwra]

It really depends how long you plan to do this.

If it's just a 6 month thing use an umbrella. If this is going to be a permanent arrangement then set up a LTD.

Its this really, Limited Companies arent much more hassle but you will need an accountant to do your annual accounts which is £500 or so, set up costs are £100ish and its more administration, its not worth it for a short termer ......... but a Limited company gives you much more freedom with expenses, you can VAt register yourself and you have the dividend pay option too. Id nearly always go Limited but then I run 3 already so its not really extra stress

Flat rate VAT is a good idea though, and actual VAt registration is even better if you can get away with it, 20% discount on nearly everything you buy cant be bad

[Cluck]

Its true that you don't HAVE to register for VAT but I don't agree with your advice about not bothering.

If you are selling mostly "you", you can register for a flat-rate VAT. The rate varies by profession and you get an additional 1% off in the first year.

I charge VAT at 20% and pay it at a flat rate of 14.5% (13.5 in the first year) of the grossed figure as I'm in IT. Even on a turnover of 20,000 a year that is 520 quid in my pocket or most of your accountancy bill if you want to look at it that way. You can also still claim back the VAT on large items (over 2K) even if you are using the flat rate for eveything else.

I didn't even know that was possible . In which case, yep, that makes a lot of sense .