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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I hope you can help, I've been offered a job at £85k

Customer Question

Hello I hope you can help, I've been offered a job at £85k per year but have the opportunity to come on as a self employed consultant with the same company. I currently have another sole trader business that brings in 30k but this will reduce to 15k this
year. Can you let me know how much tax I can save if I join as a consultant and put every thing through a new limited business. Can you also let me know how much the company that wants to bring me on will save if I come on as a consultant instead of employed
as they won't have to certain pay taxes. Kind regards Phil
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Hello can you let me know if you need additional information on the above question?Would you have a response time?
Expert:  bigduckontax replied 1 year ago.
Hello Phil, I am Keith, one of the experts on Just Answer, and happy to help you with your question. Benjamin Franklin once sagely observed that in life there are but two certainties, death and taxes. Whichever way you operate you are going to be taxed. If you go down the consultant route and pay yourself through your own limited company then, although your new 'employer' will not have to meet your NI contributions, the liability will pass to your limited company. If you go self employed than you will have o pay both Class 2 and Class 4 NI contributions. Furthermore any surplus profit left in the Company will be subject to Corporation Tax at 20%. Whilst not drawing money down from the company may reduce your exposure to higher rates of Income Tax you should be aware that if you breach 100K pa then you loose your Personal Allowance at a rate of a pound for every two quid you go over that limit. Other than leaving your earnings in the company and drawing them at a later date or, say, paying your spouse if she is not in employment, and even then employers NI contributions will come into play this sort of tax planning is akin to rearranging the deck chairs on the Titanic! I am so sorry to have to rain on your parade. An awful lot of working with a wet towel round your head and the backs of several envelopes working out the options might yield a little leeway, but not much. Contributions to a private pension plan by you or your limited company up to 40K in any one tax year will reduce your exposure to Income Tax/Corporation Tax and, if you have not made contributions in previous years you can go back and mop up unused contribution limits. Such action does, however, reduce your cash flow.

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