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bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 4091
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I am currently employed as PAYE, but looking to start my own

Customer Question

I am currently employed as PAYE, but looking to start my own limited company. The main reason for this is to enable me to work when i want and take work breaks to suit my family rather than the tie of 9-5, 5 days a week. My existing employer has offered me work on a contract by contract basis, and initially this will form the main basis of my work, until i build up work from other contractors. is this allowed?
Submitted: 2 years ago.
Category: UK Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

What you propose is a perfectly proper manner in which to proceed. I always feel that it is a good idea to work professionally through a limited company as it reduces your personal exposure to risk in the unfortunate event of something going wrong which we all hope will never happen.

However, I should caution you regarding the taxation position. If you are a director of the company you propose to form then you are an employee per se and must receive salaries under PAYE arrangements with tax and NI deducted and rendered to HMRC monthly or quarterly. Any profits retained in the company will be subject to Corporation Tax at 20% which is rather better than individual higher rates tax which explains the popularity of service companies akin to the one you propose. Of course, when you start making millions a holding company in The Channel Islands, Gibraltar or the Turks and Caios Islands or some other tax haven may be needed, but I think that we are looking a little too far ahead!

I do hope that I have set yout mind at rest on this matter.